Simple vs. Compound Interest -- Spreadsheeting the Difference
Summary
In this Spreadsheets Across the Curriculum activity, students are guided step-by-step to build a spreadsheet that compares the future value of an investment that grows exponentially (compound interest) to the future value of the same investment that grows linearly (simple interest). The students calculate the year-to-year succession of future values, plot them on XY-graphs against time, and fit trend lines. The module emphasizes the differences in the future values many years out from the initial investment. Spreadsheet difficulty level is elementary. This module can be the students' first experience in building a spreadsheet to perform a systematic calculation.
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Learning Goals
- Understand the difference between simple and compound interest.
- Use Excel functions to do the same calculations easily.
- Plot the results for each on a scatter diagram and add a trend line/curve to each.
- Use the spreadsheet to forward model.
- Gain experience with both the simple and compound interest formulas.
- Compare the difference in growth between simple and compound interest for several different interest rates.
- Determine which interest method is used for common financial products (i.e., loans, savings).
- Format cells in an Excel worksheet.
- Estimate values from a graph.
Context for Use
Description and Teaching Materials
SSAC2005.HG1621.GTF1.1-student (PowerPoint 265kB Nov20 06)
The module is a PowerPoint presentation with embedded spreadsheets. If the embedded spreadsheets are not visible, save the PowerPoint file to disk and open it from there.
This PowerPoint file is the student version of the module. An instructor version is available by request. The instructor version includes the completed spreadsheet. Send your request to Len Vacher (vacher@usf.edu) by filling out and submitting the Instructor Module Request Form.