Learning Activity for Compund Interest: contemporary application

 

The target year level for this activity is year 10 algebra class which includes a diverse cohort of domestic and international students from Asia who have English as an additional language. The lesson is scaffolded to assist students at different learning levels or different levels of English. The students are expected to complete ‘modelling situations that involve working with authentic information, data and interest rates to calculate compound interest and solve related problems’ (Australian Curriculum).

The activity:

Time = ~60mins

Part 1:

Students are instructed to look up interest rates at a minimum of least 3 banks, one of which can be their own if they choose.

Bank suggestions could include:

·       NAB

·       Commonwealth Bank

·       Heritage Bank

·       Bank SA

·       ING

·       Suggestion that students can look up an International Bank or bank from their home country if they wish.

Students are asked to record the differing rates they find in a table.

	Bank Name	Rate (%)	Month/Year
1
2
3

 

To support students with additional learning needs, they will be provided with links to three of the banks above to aid in findings the correct information.

As an extension for students who might require it, they can compare the interest rates at different points in time from the last year (as they have changed significantly recently). The teacher should ask reflective questions to students including: ‘why do you think this changes?’, or ‘How does that affect savings or borrowings?’. This will help improve their critical thinking skills around a more complex problem.

I believe this is what makes this type of maths very contemporary as it changes daily which is challenging but interesting for students.

 

Part 2:

Students will then rotate through case scenarios provided by the teacher about savings and loans. They will use the interest rates from the different banks to determine which bank will provide them with the most savings or least debt and justify why.

Scenarios include:

1.       Estelle wants to invest $400 in a bank account for 6 years. Which bank account should she choose? Why? Compare all 3 Banks.

2.       Gustavo borrows $1800 from Bank 3. The bank charges him compound interest (the number you found) per annum. How much interest will Gustavo owe after 3 years? Assume he makes no payments before that point.

3.       Tjimarri invests $2000 into Bank 2 who charges compound interest annually. After how many years will Tjimarri have over $2250 in the bank, assuming the account is not touched?

Adapted from Twinkl (2022).

 

Part 3: Adding graphing

Lisa invests $250 in January 2012 with compound interest from Bank 1.
Ben invests $300 in January 2012 with compound interest from Bank 2.
a) Draw a graph showing the value of the investment between 2012 – now.
b) Use the graph to determine if/when their investments intersect.

For students who have successfully completed the above parts, they are then encouraged to use their calculations from Part 2, to graph the financial growth or deficit for each question. Graphs should include the months/years as appropriate.

Adapted from Twinkl (2022).

The goal of this activity to for students to be able to source information from banks about interest rates and apply them to realistic financial situations which they will experience in the future. They can then represent this on a graph to reinforce these maths skills and be able to show both written and visual representation of data.

The activity aims to be engaging and relevant to students as it allows them to see how this type of maths can be used in daily life. The content within the lesson helps reinforce the content knowledge that would be taught within class. I think practical application should be a key focus in contemporary maths topics. The concept of interest can easily be scaffolded for students to either cover basic simple or compound interest calculations, or for those advanced students, they can use the changing rates of interest to deepen their understanding of calculations changes.

Reflecting on the activity planned, I would try consider next time how to make the work more collaborative so students can practise, learn and compare with each other. Because it allows students to use examples from their own experiences, it makes the learning more inclusive and should provide opportunities to discuss their own findings and reason through differences between each other.

 

Reference List:

Australian Curriculum. (2022). Year 10: Mathematics. ACARA. Retrieved 14/11/22 from https://v9.australiancurriculum.edu.au/f-10-curriculum/learning-areas/economics-and-business-7-10_mathematics/year-7?view=quick&detailed-content-descriptions=0&hide-ccp=0&hide-gc=0&side-by-side=1&strands-start-index=0&subjects-start-index=0.

Bond, T. (2019). Financial Mathematics in Year 10. AMEJ, 1(1), 25-30.

Song, C. (2020). Financial illiteracy and pension contributions: A field experiment on compound interest in China. The Review of Financial Studies, 33(2), 916-949.

Twinkl. (2022). Compound Interest. Simple and Compound Interest Worksheets. Retrieved 16/11/22 from https://www.twinkl.com.au/search?q=compund+interest&c=12&ca=125&ct=ks3&r=teacher&fco=18277.