Why interest snowballs over time

Civics & Economics · Economics · ages 15-16

Name ______________________ Date ____________

What does 100 coins at 10 percent become after two years compounded?
- 120 coins
- 110 coins
- 121 coins
100 coins at 10 percent compound: what do you hold after year one?
- 100 coins
- 110 coins
- 121 coins
200 coins at 5 percent simple interest for 3 years: what is the total interest?
- 10 coins
- 30 coins
- 230 coins
Two loans share a monthly payment but differ in rate and term. How do you compare them?
- Pick the friendlier monthly bill
- Compare the yearly rate, then the total repaid including fees
- Pick the longer term always
200 coins at 5 percent simple interest for 3 years: type the final balance.
Answer: ______________
Why does a card debt left alone grow faster each year?
- Because each year adds interest on a growing base
- Because banks forget old balances
- Because simple interest shrinks debts
100 coins at 10 percent compound for 3 years: type the final balance.
Answer: ______________
At the same rate, simple and compound interest give equal totals over twenty years.
Circle one: True False

Answer key

For grown-ups. Fold this page away before handing over the rest.

121 coins · Year two pays on 110, adding 11 to reach 121.
110 coins · Year one adds 10 percent of 100, landing at 110.
30 coins · Simple pays 10 a year on the original sum: 30 across three years.
Compare the yearly rate, then the total repaid including fees · Monthly bills flatter lenders; totals reveal the true cost.
230 · Add 30 of interest to 200: the balance ends at 230.
Because each year adds interest on a growing base · Compounding repeats on past interest, so yearly gains swell.
133.1 · 110, then 121, then 133.1: each year pays on a larger base.
False · Over one year they match; over twenty they live on different planets.