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 III

Introduction

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

In this module you will consider the following questions:

Below are three scenarios that people have asked for your expert mathematical advice on. Use the With Additional Investment worksheet and print off some graphs which show the answer to each question. You should also write a short explanation of each graph.

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The Tasks

Scenario 1: Katrina rents DVDs worth $50 a month each month. If she stops renting DVDs for a year and puts the money into her investment account instead, how many $25 DVDs could she buy with the proceeds after 10 years?

a) If the account earns 5% interest?

b) If the account earns 10% interest?

Scenario 2: I set up a $10,000 investment with an 8% interest rate 20 years ago. I'm not very happy with the proceeds. How much more would I have if I had added just $100 a month for the whole 20 years?

Hint: How many months are there in 20 years?

Scenario 3: What general advice would you give to a young person starting to invest based on your responses to the previous two questions?

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Modifications to this page 2004, Paul Myers & Brendan Sullivan