Math-in-CTE Lesson Plan
Lesson Title: Interest Calculation
Lesson Number: BU04
Occupational Area: Business and Marketing
CTE Concept(s): Compound Interest
Math Concepts: Compound Interest, Order of Operations, Exponents
Lesson
Objective:
After completion of this lesson, the student should be able
to: Define: Interest, Principal, Interest Rate and
Compounding Interest; Calculate: compound interest.
Supplies
Chalkboard/Whiteboard
Needed:
Interest Calculation Worksheet
Link to Accompanying Materials: Business/Marketing BU04 Downloads
TEACHER NOTES
(and answer key)
1. Introduce the CTE lesson.
Simple Interest was the topic prior to
Compound Interest; so much of the
As a warm-up activity, have students
define: Interest, Principal, Interest Rate, vocabulary has been discussed.
Annual Percentage Rate (APR), and
INTEREST: amount earned for
Annual Percentage Yield (APY)
permitting the bank to use your
We talked earlier about simple interest, money or the amount you pay to
borrow money from a financial
and how many of us pay interest or
institution.
receive interest. What are some of the
THE "7 ELEMENTS"
ways that happens? (Expect answers
such as: loans, savings accounts, etc)
However, most of these examples are
types of interest we call COMPOUND
INTEREST.
COMPOUND INTEREST: interest
earned not only on the original principal
but also on the interest earned during
previous interest periods.
PRINCIPAL: the amount of money
earning interest.
APR: an index showing the relative
cost of borrowing money.
APY: the total interest of return for
one year expressed as a percent of
the principal.
The formula for compound interest is:
r

A  P 1  
 n
nt
P = principal
r = interest rate (as decimal)
n = number of compoundings/year
t = number of years
1
2. Assess students’ math awareness
as it relates to the CTE lesson.
Quiz students on Simple Interest
Formulas, knowledge of these will help
with Compound Interest Formulas.
I = Prt
1.
1. If your principal amount is $400
and you leave your money in an
account earning simple interest for 2.
3 months. If you have earned
$6.50, at what percentage rate
were you earning money?
2. If you earned $56.25 after 6
months earning 7.5%, how much
was your principal balance?
3
6.50 = 400(r)( 12
)
6.50 = 100r
r = .065  Interest rate 6.5%
6
56.25 = P(.075)( 12
)
56.25 = .0375P
$1500 = P
3. What is interest?
3. Interest: amount earned for
permitting the bank to use your
money or the amount paid for
borrowing money from the bank
4. What is the Principal amount?
4.
3. Work through the math example
embedded in the CTE lesson.
1. Alicia Martin’s Savings account
principal is $800. The 6% interest is
compounded quarterly. How much is in
the account at the end of 2nd quarter?
At the end of the year?
Principal: amount of money
earning interest.
2 *1
 .06 
1. A  800 1 
= $824.18
4 

Notice on this equation, our
exponent is 2 instead of 4. The
students will question this. Explain
to the students that although the
amount is compounded quarterly (4
times a year), that since we are
looking for the amount after the 2nd
quarter, this only covers two
compoundings which is why the
value is 2.
 .06 
A  800 1 
4 

4. Work through related, contextual
math-in-CTE examples.
4 *1
=$849.09
1. $907.95
1. Elmer Pasture deposited $860 in a
new regular savings account that
earns 5.5% interest compounded
semiannually. He made no other
deposits or withdrawals. What was
the amount in the account at the end
of 1 year?
2
2. If Jim Smythe had $10,613.64 in
his account after 1 year, invested
at 6% interest rate compounded
quarterly, how much was Jim’s
principal balance?
 .06 
10,613.64  A 1 
4 

4 *1
10,613.64  A 1.015
4
2. 10,613.64  A 1.06136
1.06136
1.06136
10,000.00  A
5. Work through traditional math
examples.
In traditional math class, compound
interest and simple interest problems
One of the things that is important about are used in many classes to
demonstrate the use of exponents,
solving simple and compound interest
and are calculated using the same
problems in traditional math classes is
formulas. Therefore, the CTE
the correct use of the order of
concept and math concept are
operations. For example, plug in the
intertwined so well together.
following values into the equations
below and solve for x:
1. x = 5(-3)2 - 1
a = 5 b = -3 c = -2 d = 1
x = 5(9) - 1
1. x = ab2 - d
x = 45 - 1
1. x = 44
2. (-3)x = (-2) + 1
-3x = -1
2. bx = c + d
2. x =
1
3
 .3333
3. 5 = -2(x - (-3)(5))
5 = -2(x - (-15))
3. a = c(x - bd)
5 = -2(x + 15)
5 = -2x -30
35 = -2x
3. x =  352  17.5
6. Students demonstrate their
understanding.
See Interest Calculation Worksheet
1
2
3
4
5
6
7
COMPOUNDED
YR-END BALANCE
SIMPLE
INTEREST YREND BALANCE
3182.70
8366.12
7765.97
7766.75
10712.25
12891.50
14541.67
3180.00
8360.00
7762.50
7762.50
10700.00
12885.75
14502.15
3
7. Formal assessment.
Unit Test Question:
ANSWER:
Your parents plan to start a retirement
account. They plan to invest $30,000
dollars in an account that earns 7%
interest. How much more will they earn
in an account that compounds interest
quarterly, compared to calculated using
simple interest in 5 years time?
COMPOUND QTRLY: $42,443.35
SIMPLE INTEREST: $40,500.00
Compounding makes $1,933.35
more over 5 years.
4