This is the first of several lessons that develop students' ability to use exponential expressions (and eventually functions) to model repeated interest calculations. Students graph the associated exponential functions for different interest rates. Though the term compounding is not yet used with students, the activities help students see that, in the context of borrowing money, high interest rates and compounding do not favor the borrower. In later lessons, students will learn that the same mechanisms can be favorable in the context of saving money.

To represent compounded interest with an exponential expression or an exponential function, students need to realize that the process of repeatedly applying, say, 5% interest times, is the same as multiplying by . This is an example of looking for and expressing regularity in repeated reasoning (MP8).