# Mastering Compound Interest: 10 Examples Explained for JSS 3 Math Students JSS 3 Mathematics Third Term Lesson Notes Week 2

**Subject:** Mathematics

**Class:** JSS 3

**Term:** Third Term

**Week:** 2

**Topic:** Compound Interest

**Sub-topic:** Understanding and Applying Compound Interest

**Duration:** 1 hour

**Behavioural Objectives:**

- By the end of the lesson, students should be able to calculate compound interest accurately.
- Students should understand the concept of compounding and its impact on savings.
- Students should identify real-life situations where compound interest is applicable.

**Learning Resources and Materials:**

- Whiteboard and markers
- Textbooks with compound interest examples
- Calculators
- Worksheets with compound interest problems

**Building Background /Connection to prior knowledge:**

- Recap on the concept of simple interest and its formula to establish a foundation for understanding compound interest.
- Relate the idea of earning interest on savings accounts to introduce the concept of compound interest.

**Embedded Core Skills:**

- Critical thinking
- Problem-solving
- Numeracy skills

**Content:**

**10 worked out samples with explanations:**

**Sample 1:**- Initial deposit: ₦1000
- Annual interest rate: 5%
- Time: 3 years
- Compounded annually
- Formula: A = P(1 + r/n)^(nt)
- Calculation: A = 1000(1 + 0.05/1)^(1*3)
- Answer: A = 1000(1.05)^3 = ₦1157.63

**Sample 2:**- Initial deposit: ₦2000
- Annual interest rate: 8%
- Time: 2 years
- Compounded semiannually
- Calculation: A = 2000(1 + 0.08/2)^(2*2)
- Answer: A = 2000(1.04)^4 = ₦2166.40

**Sample 3:**- Initial deposit: ₦5000
- Annual interest rate: 10%
- Time: 5 years
- Compounded quarterly
- Calculation: A = 5000(1 + 0.10/4)^(4*5)
- Answer: A = 5000(1.025)^20 = ₦8144.47

**Sample 4:**- Initial deposit: ₦3000
- Annual interest rate: 12%
- Time: 1 year
- Compounded monthly
- Calculation: A = 3000(1 + 0.12/12)^(12*1)
- Answer: A = 3000(1.01)^12 = ₦3360.71

**Sample 5:**- Initial deposit: ₦4000
- Annual interest rate: 6%
- Time: 4 years
- Compounded annually
- Calculation: A = 4000(1 + 0.06/1)^(1*4)
- Answer: A = 4000(1.06)^4 = ₦4843.35

**Sample 6:**- Initial deposit: ₦6000
- Annual interest rate: 7%
- Time: 3 years
- Compounded quarterly
- Calculation: A = 6000(1 + 0.07/4)^(4*3)
- Answer: A = 6000(1.0175)^12 = ₦7312.83

**Sample 7:**- Initial deposit: ₦8000
- Annual interest rate: 9%
- Time: 2 years
- Compounded semiannually
- Calculation: A = 8000(1 + 0.09/2)^(2*2)
- Answer: A = 8000(1.045)^4 = ₦9397.04

**Sample 8:**- Initial deposit: ₦7000
- Annual interest rate: 4%
- Time: 5 years
- Compounded annually
- Calculation: A = 7000(1 + 0.04/1)^(1*5)
- Answer: A = 7000(1.04)^5 = ₦8221.68

**Sample 9:**- Initial deposit: ₦9000
- Annual interest rate: 11%
- Time: 3 years
- Compounded quarterly
- Calculation: A = 9000(1 + 0.11/4)^(4*3)
- Answer: A = 9000(1.0275)^12 = ₦13336.16

**Sample 10:**- Initial deposit: ₦10,000
- Annual interest rate: 8%
- Time: 4 years
- Compounded monthly
- Calculation: A = 10000(1 + 0.08/12)^(12*4)
- Answer: A = 10000(1.0066667)^48 = ₦13102.67

These examples show how to calculate compound interest over different periods using the compound interest formula. 📊

Evaluation :

- Compound interest is when you earn interest on both the ________ and on the interest that money earns over time.
- a) initial amount
- b) final amount
- c) monthly deposit
- d) bank statement

- If you deposit ₦1000 into a bank account with 5% interest per year, in the first year you’ll earn ________ interest.
- a) ₦50
- b) ₦5
- c) ₦100
- d) ₦500

- Compound interest helps your money grow ________ over time.
- a) slower
- b) at a constant rate
- c) faster
- d) at the same pace

- The formula for compound interest is A = P(1 + r/n)^(nt), where A is the ________.
- a) amount of money accumulated after n years
- b) initial deposit
- c) bank balance
- d) annual interest rate

- In the formula for compound interest, P represents the ________.
- a) amount of money accumulated after n years
- b) initial deposit
- c) annual interest rate
- d) number of years

- If you deposit ₦2000 at 8% interest compounded annually for 3 years, what will be the total amount after 3 years?
- a) ₦2240
- b) ₦2304
- c) ₦2160
- d) ₦2048

- Compound interest is important because it helps your savings grow ________ over time.
- a) slowly
- b) at the same rate
- c) at a constant pace
- d) faster

- The number of times interest is compounded per year is represented by the letter ________ in the compound interest formula.
- a) r
- b) n
- c) t
- d) P

- If you deposit ₦5000 at 6% interest compounded semiannually for 2 years, what will be the total amount after 2 years?
- a) ₦5658
- b) ₦5300
- c) ₦5100
- d) ₦5050

- What does the ‘r’ represent in the compound interest formula?
- a) Number of times compounded per year
- b) Principal amount
- c) Annual interest rate
- d) Number of years

- If you deposit ₦3000 at 12% interest compounded quarterly for 1 year, what will be the total amount after 1 year?
- a) ₦3360
- b) ₦3120
- c) ₦3240
- d) ₦3280

- Compound interest helps your money grow faster over time because you’re earning interest on both your initial deposit and on the interest it ________.
- a) loses
- b) earns
- c) borrows
- d) spends

- What does ‘A’ represent in the compound interest formula?
- a) Amount of money accumulated after n years
- b) Initial deposit
- c) Annual interest rate
- d) Number of times compounded per year

- If you deposit ₦4000 at 4% interest compounded monthly for 2 years, what will be the total amount after 2 years?
- a) ₦4368
- b) ₦4168
- c) ₦4048
- d) ₦4088

- In compound interest, you earn interest on both the initial amount of money you deposited and on the ________ that money earns over time.
- a) principal
- b) expenses
- c) profits
- d) interest

Class Activity Discussion :

**What is compound interest?**- Compound interest is when you earn money not only on the original amount you deposited but also on the interest that money earns over time.

**How does compound interest work?**- It helps your money grow faster because you earn interest on both your initial deposit and the interest it accumulates.

**What’s the formula for compound interest?**- The formula is A = P(1 + r/n)^(nt), where A is the total amount, P is the principal amount (initial deposit), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years.

**Why is compound interest important?**- It allows your savings to grow faster over time, helping you reach your financial goals sooner.

**How often can interest be compounded?**- Interest can be compounded annually, semiannually, quarterly, or monthly, depending on the terms of the investment or loan.

**Can compound interest work against you?**- Yes, if you have loans or debts with compound interest, it can accumulate quickly, making it harder to pay off.

**What’s the difference between compound interest and simple interest?**- Compound interest earns interest on both the initial amount and the interest earned over time, while simple interest only earns interest on the principal amount.

**Is compound interest always beneficial?**- Yes, if you’re saving or investing money, compound interest can help it grow faster over time.

**Does compound interest apply to both savings and loans?**- Yes, compound interest applies to both savings accounts and loans, but the effect is different depending on whether you’re earning or paying interest.

**Can compound interest make a small amount of money grow significantly over time?**- Yes, even a small initial deposit can grow into a substantial amount over time due to the power of compound interest.

**What happens if I withdraw money from a compound interest account?**- Withdrawing money reduces the amount of interest you earn because there’s less money left to accumulate interest.

**How can I calculate compound interest without a formula?**- You can use online calculators or mobile apps designed for compound interest calculations.

**Can compound interest be negative?**- Yes, if the interest rate is negative, it means you’re losing money over time instead of gaining it.

**Is compound interest the same as investing?**- Compound interest is one aspect of investing, but investing involves various strategies and risks beyond just earning interest on savings.

**Can compound interest help me reach my financial goals faster?**- Yes, by saving or investing regularly and letting compound interest work for you, you can accelerate your progress towards financial goals like buying a house or retiring comfortably.

**Presentation:**

**Step 1:** The teacher revises the previous topic, “Simple Interest,” by asking students to recall the formula and how it works. Understanding how compound interest works and its applications JSS 3 Mathematics Third Term Lesson Notes Week 1

**Step 2:** The teacher introduces the new topic, “Compound Interest,” by explaining that it’s when interest is earned not only on the initial deposit but also on the interest accrued over time.

**Step 3:** The teacher encourages students to share their understanding of compound interest and any questions they may have. The teacher corrects any misconceptions and provides additional explanations as needed.

**Teacher’s Activities:**

- Reviewing the concept of simple interest.
- Explaining the concept of compound interest using examples and diagrams.
- Demonstrating how to use the compound interest formula to solve problems.
- Facilitating class discussions and answering questions.

**Learners’ activities:**

- Participating in discussions.
- Asking questions for clarification.
- Solving compound interest problems individually and in groups.
- Presenting their solutions to the class.

**Assessment:**

- Observing students’ participation in class discussions and their ability to solve compound interest problems.
- Reviewing completed worksheets for accuracy.
- Asking questions during the lesson to gauge understanding.

**Evaluation questions:**

- What is compound interest?
- How does compound interest differ from simple interest?
- What’s the formula for compound interest?
- How often can interest be compounded?
- Can compound interest work against you? How?
- Give an example of a real-life situation where compound interest is applicable.
- If you deposit ₦5000 at 8% interest compounded annually for 3 years, what will be the total amount after 3 years?
- What happens if you withdraw money from a compound interest account?
- How can compound interest help you reach your financial goals faster?
- What are some strategies for maximizing compound interest earnings?

**Conclusion:**

- The teacher goes round to mark students’ work and provides necessary corrections.
- Reinforce key concepts and encourage students to continue practicing compound interest problems to improve their understanding.