Engaging students: Compound interest

In my capstone class for future secondary math teachers, I ask my students to come up with ideas for engaging their students with different topics in the secondary mathematics curriculum. In other words, the point of the assignment was not to devise a full-blown lesson plan on this topic. Instead, I asked my students to think about three different ways of getting their students interested in the topic in the first place.

I plan to share some of the best of these ideas on this blog (after asking my students’ permission, of course).

This student submission comes from my former student J. R. Calvillo. His topic, from Precalculus: compound interest.

The mathematical community adopted the concept of compound interest very well. Albert Einstein was one of if not the biggest mathematician who adopted this policy of compound interest very well. His most notable quote on the topic is, “Compound interest is the eighth wonder of the world. He who understand it, earns it… He who doesn’t… pays it.” (Albert Einstein) Compound interest has expanded even from the mathematical community and spread to banks, and how they decide to give out interest on deposits or loans. The concept of compound interest has truly been one of the most well received concepts in the mathematical community, so much so that it even spread outside of that community into the business world. Where it then changed how businesses and banks looked at interest.

How could you as a teacher create an activity or project that involves your topic?

Compound interest is a very important and very relatable topic for teachers to be able to relate real world examples to.  With that, I believe it is very important to make compound interest relatable to the real world uses that students’ will one day see when they get older. To begin the activity, each student will receive \$2,000. That \$2,000 will be put in the bank and the bank has agreed to add interest. The bank decided to give them the option on how they want that interest compounded; daily, monthly, quarterly or yearly. At the end we will group together the students’ who wanted to compound their interest similarly. Each group will get to explain why they chose how often it will be compounded, then will get the opportunity to solve how much it will grow after 2 years, 4 years and 20 years. This will then allow the students to see the differences and similarities between the different options that the bank provided, and which option will earn you the most money.

How can this topic be used in your students’ future courses in mathematics or science?

Compound interest is a topic that will originally get introduced in a pre-calculus class, however, if any students’ go onto take classes such as statistics or any other business related math, it will contain material on compound interest. It is used as such a big role in the business world that getting a true understanding how it works and the reasoning behind why it works is crucial from the earliest class that we see it in.  In later classes it can be touched on more so, especially reaching the ways that it is beneficial to use it or the ways that it may hurt to use it. Either way it is a concept that will come up again whether you see it in the classroom, or in real life. Compound interest is one of if not the most relatable topic to the outside world with all of its applications to loans and how it is used in banks. Getting the fundamental concepts early is a crucial aspect to understanding its deeper usage in other courses.

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