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Overview
Grade 11 Essential Mathematics (30S) - Half Course 3
Develop an understanding of credit and the effects of interest
2. Demonstrate an understanding of compound interest
2.3 Finance: Compound interest
Compound Interest Formula
See how the compound interest formula works, why it grows faster than simple interest, and how to use it in real money problems.
What You'll Learn
Compound interest is interest earned on both the original principal and on interest already added to the account.
The formula is \(A = P(1 + r/n)^{nt}\), where P is principal, r is annual rate, n is compounds per year, and t is time in years.
Increasing the compounding frequency n makes the balance grow faster, even with the same rate and time.
Compound interest follows the same exponential pattern used in exponential growth models, just applied to money.
A worked example shows how a one thousand dollar deposit at five percent compounded monthly grows over ten years.
What You'll Practice
1
Calculating final amounts with various compounding frequencies
2
Working with the compound interest formula A = P(1 + r/n)^(nt)
3
Solving for interest rate when investment doubles over time
4
Converting between decimal and percentage forms of interest rates
Why This Matters
Compound interest is essential for making smart financial decisions about savings, investments, and loans. Understanding how your money grows over time helps you plan for major life goals like college, retirement, or buying a home, and prepares you for real-world personal finance.
Before You Start — Make Sure You Can:
This Unit Includes
6 Video lessons
Practice exercises
Learning resources
Skills
Compound Interest
Exponential Growth
Financial Math
Interest Rate
Investment Calculations
Algebraic Modeling
MB Curriculum Aligned