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Introduction
This mathematical direct investigation is based on compound interest. The task is to
calculate the total interest earned each period between 4 and 10 years using two
different options supplied and a principle of $2000. It is required to investigate the
options and prepare a report for your recipients displaying the advantages and
disadvantages of the different investments.
The field of mathematics that will be explored is compound interest. This will be
discovered by using a spreadsheet to calculate the interest that is earned and the final
amount that would be in the account.
Each option will be calculated with either simple interest (option one) and
compound interest (option two).
The expected outcome is that option two will be the best option even though it holds a
lower interest rate (4.85%) that is compounded annually.
Mathematical Investigation
Task oneThe key aspect of this mathematical investigation was discovering whether option one or
option two would be the most appropriate choice. This was done by using Google
Sheets.
The outcome is explained using the information supplied above. This mathematics
proves that option two ($3,211.55) would have the higher account balance that than
option one ($3,150.00) after a total of 10 years. The graph supplied shows that until the
ninth year, option one would have been more appropriate.
Task two-
By comparing the results, it was proved that the best option would be to compound
quarterly as the final amount will be of a higher value ($3,238.89) compared to either
$3,150.00 and $3,211.55.
This mathematical investigation shows that with option one wouldve been more
appropriate for this persons situation until the ninth year, but after that year option
two became the better choice between the two. When task two is added into the
equation, it proves that it is more suitable to compound annually.
Within the first four years, option one was the better choice for the buyer. tThis is
because the rate couldve gained approximately $40-$50 on option two.
The final answer to this investigation is that option two would be the most suited until
task two is added to the options, which then becomes most appropriate.
The most important part of this mathematical directed investigation is the final answers
that have been proven.
Option one - $3,150.00
Option two - $3,211.55
Task two - $3,238.89
These answers showed that it is in the best interest of the buyer to chose the option
where compounding quarterly is available.
cComparing the two graphs shows that like previously stated, until the ninth year,
option one was the better option.
The advantages and disadvantages of each option would be
If this investment continues for an extra 15 years (25 years total) then option two would
remain the best option. This was proven by extending and editing the Google Sheets
document to a total of 25 years.
Option one
Option two
This table shows that option two would have a total of $4,979.51 compared to option
one which would be the total of $4,875.00. A difference of $104.51.
Changing the compounding period from annually to quarterly increased the interest of
the grandparents account by $27.34 . This was proven by the comparisons of the final
answers of each option from both tasks.
This solution is a very realistic outcome, as it will save the grandparents money and will
help understand the terms of the investment.
A limitation to this investigation was not having the access to the graphing tool on
Google Sheets. While converting the document from excel to sheets, the formatting
changed and changed some of the answers to the required tasks. An improvement to
this is using laptops for the whole assignment and instead to using sheets, use excel.
wWhile completing this direct investigation, new skills were acquired in using google
sheets which leads to having and improving the knowledge of technology.
Conclusion
In summary, the final solution to this mathematical investigation is that option two
using compound interest would the most appropriate choice for the grandparents.
The hypothesis stated in the introduction was supported by the evidence and answers
supplied in the mathematical investigation aspect of this compound interest folio.
Task Sheet
Year 10 Australian Curriculum Mathematics
Name of Assessment Task: Financial Maths DI
Date Issued:
Task Weighting:
Achievement Standards
Recognize the connection between simple and compound interest.
Task Description
This assessment will require you to set up a spreadsheet that will help compare the effects of
earning interest at a flat rate and compounding rate. This spreadsheet will then be used to consider
various scenarios to work out appropriate solutions.
Task Introduction:
Your grandparents have offered to make an investment of $2,000 over a period between 4 and 10 years on your
behalf.
The following interest rates have been quoted from two different financial institutions:
Option 1:5.75% p.a. flat rate (Interest payable into your account)
Mathematical Investigations
Hints and Tips:
To be able to compare figures easily you set up two tables adjacent to each other on your screen
(use the landscape option to fit these tables on one page). The two tables will each require a
data table, which holds all of the changing information from one question to the next. This
could include information like:
Principal
Interest rate
Number of compounding periods
Interest rate per period
The main body of the spreadsheet (the two tables) will use as many formulae as possible, so that
changes made to the data table can be automatically calculated. The following headings should
be used in your tables:
Period
Principal
Interest
Balance
Set up the table for the simple interest spreadsheet as displayed below:
You will need to submit your spreadsheet by email. It must have your name in the title.
Task 1: Comparing simple and compounding interest
Create two tables, one for each option, using the known simple interest and compound interest formula, for 10
years as shown in the hints and tips.
Construct a graph of the cumulative amount of interest per year against the number of years.
Print off a copy of the spreadsheet, the formula sheet and your graph.
Analysis/Discussion
Critically analyse your results referring back to the original problem. Summarise your findings, drawing any
comparisons or commenting on differences, advantages or disadvantages. You should answer the following
questions:
Task 1:
What is the balance of each investment after 10 years and how much interest was earned in each account?
Which interest rate earns the most interest for the first 4 years? Why do you think that this is the case?
Discuss the difference between and compare the two graphs.
What are the advantages and disadvantages of each option?
If this investment was to continue, which option provides the best option? Justify your choice.
Task 2:
How did changing the compounding period change the investment?
Did your calculations match those in the spreadsheet? Why/why not?
Conclusion
Which option would you suggest your grandparents choose, for how many years, and why.
Content
Strand
Number and
Algebra
Proficien
cy
Strands
Understanding
Fluency
Literacy
ICT
capability
General
capabilit
ies
Crosscurriculu
m
prioritie
s
Numeracy
PR2
Spreadsheet +
graph
PR3
Discussi
on
Measurement and
Geometry
PR5
Handwritten
calculations
Problem
Solving
Critical
and
creative
thinking
PR4
Conclusion
Ethical
behavio
ur
Reasoning
Personal
and social
capability
Intercultural
understandi
ng
Sustainability
Assessment Conditions
1x double lesson plus homework time.
Modification of task format/length/due date available for students on NEPs, ILPs, IEPs, HCPs or with prenegotiated circumstances.