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Two people open bank accounts and deposit \$1,000 each. Both bank accounts earn 7.5% interest every year.
How much money does each person have after 5 years? Explain.
The goal of this discussion is to compare the result of earning interest on interest and only earning interest on the original amount, as well as showing ways of organizing approaches to this situation. Select students to share their work who organized it clearly. For example, the information and calculations could be organized in tables, like this:
| year | 0 | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|---|
| Kiran's account balance | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 |
| amount Kiran has withdrawn | 0 | 75 | 150 | 225 | 300 | 375 |
| Jada's account balance | 1,000 | 1,075 | 1,155.63 | 1,242.30 | 1,335.47 | 1,435.63 |
The important point to draw out is that Jada earned interest on her interest, and Kiran did not. Here are some questions for discussion:
The goal is for students to discuss the situations and calculate repeated percentage change. Much of the discussion will occur within the groups. If time permits, consider conducting a gallery walk. Post each group’s visual display around the room, and give every student a few sticky notes to add questions or comments to the displays.
Alternatively, invite one group for each problem to present their work to the class. To keep other students involved, ask: