Section 1

Discover

 

Try This 1

 

Jeremy and Sara both receive a graduation gift of $1000. Instead of spending this money, they decide to invest the cash. But both Jeremy and Sara are unsure about investing the money with simple or with compound interest.

 

Click on the play button in the Simple Interest Versus Compound Interest applet to explore the difference between simple interest and compound interest. Pay close attention to what is happening to the interest after each compounding period.

1. In Year 1, both investments earn interest. What is the difference between what happens with this interest between the simple interest investment and the compound interest investment?
   
   
2. After 15 yr, who earns more money?

Save your answers to your course folder.

 

Share 1

 

 With a partner or in a group, compare your answers to Try This 1. Discuss the following question:

• Why did one investment earn more than the other investment?

If required, save a record of your discussion in your course folder.