Originally created for a University of Canberra "Information Technology & Education" Project in October 2004

A Webquest on Compound Interest
by Paul Myers & Brendan Sullivan

Compound Interest - Module II

Introduction

Of all the variables used in calculating Compound Interest, which is the most important - Interest Rate, Principal (amount invested), or Time?

You can use the Excel worksheet "Compound Interest" to run simulations to solve many of these money problems. Click on the hyperlink below to access this worksheet.

Below are several questions about the relationship between different investment variables. Use the Compound Interest worksheet and print off some graphs which show how the variables relate to each other. You should also write a conclusion explaining what you have found.

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The Tasks

1. Which would you rather for your investment?

a) A 2% increase in the inteest rate? or,
b) A $5000 increase in the initial investment?

What would your answer depend on?

Answer with graphs to illustrate your point.

2. Which is better?

a) Saving $1,000 now? or,
b) Saving $2,000 in 15 years time?

What would your answer depend on?

Answer with graphs to illustrate your point.

3. Explain the importance of the three variables, amount invested, interest rate and time and how they are related.

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Modifications to this page 2004, Paul Myers & Brendan Sullivan