Suggested Money Lesson Plan
for this Worksheet
With compound interest you receive
interest not only on the initial amount, but on the interest as well. In other
words, interest is accumulated on any interest received.
For example, if you have $100 and invest it,
and the bank pays 5% interest, then in one year you will have an
extra $5.00 interest, or $105 in total. The next year, you will receive $5.25
in interest. You get more, because now you receive interest on $105,
instead of on $100. This is compound interest.
Here is a simple formula for calculating
compound interest:
FV=PV(1+I)^{N}
FV = Future Value
PV = Present Value
I = Interest
N = Number of Years
