ILLUSTRATING SIMPLE AND COMPOUND INTEREST || GRADE 11 GENERAL MATHEMATICS Q2

Summary

This educational video lesson explains the concepts of simple and compound interest, aiming to help viewers understand and differentiate between the two. It defines key terms such as lender, borrower, repayment date, and interest rate. The lesson uses a practical example to compare simple interest, calculated only on the principal, with compound interest, which is calculated on the principal plus accumulated interest. The example illustrates the growth of a 10,000 peso investment over five years at a 2% interest rate, showing that compound interest yields slightly higher returns. The video encourages viewers to share their thoughts on which type of interest they would choose and invites them to engage in the comments section.

Takeaways

• 💼 The video lesson aims to illustrate simple and compound interest, and to distinguish between the two.
• 🏦 A lender or creditor is someone or an institution that provides money or makes funds available for borrowing.
• 📈 Borrower or debtor is the person or institution that owes money or receives funds from the lender.
• 📅 The repayment date or maturity date is the deadline for completely repaying the borrowed money or loan.
• ⏳ The term or time is the duration in years for which the money is borrowed or invested, between the origin and maturity dates.
• 💰 The principal is the amount of money borrowed or invested.
• 📊 The interest rate is the annual rate charged by the lender, usually expressed as a percentage.
• 📈 Simple interest is calculated only on the principal amount, without considering the effect of compounding.
• 🔄 Compound interest is calculated on the principal and also on the accumulated interest from previous periods.
• 💹 The maturity value or future value is the total amount the lender receives from the borrower at the maturity date.
• 💭 The video presents a scenario comparing simple and compound interest for an investment of 10,000 pesos over five years, with different interest rates.

Q & A

What are the objectives of the video lesson on simple and compound interest?

The objectives are to illustrate simple and compound interest, and to distinguish between the two.

Who is considered a lender or creditor in the context of interest?

A lender or creditor is a person or institution who invests money or makes funds available, such as someone who lets people borrow money or an investor.

What is the definition of a borrower or debtor?

A borrower or debtor is a person or institution who owes money or avails of the loan from the lender.

What is meant by the repayment date or maturity date in a loan?

The repayment date or maturity date is the date on which the borrowed money or loan is to be completely repaid, acting as a deadline or due date.

What does the term 'term' refer to in a financial context?

In finance, 'term' refers to the amount of time in years that the money is borrowed or invested, or the length of time between the origin and the maturity date.

What is the capital investment rate?

The capital investment rate is the annual rate, usually in percent, charged by the lender or the rate of increase of the investment.

How is simple interest calculated?

Simple interest is calculated on the principal amount only, without considering the interest that has been added in previous periods.

What is the difference between simple interest and compound interest?

Simple interest is calculated only on the principal, whereas compound interest is calculated on the principal plus any accumulated interest from previous periods.

What is the maturity value or future value in the context of loans?

The maturity value or future value is the total amount the lender receives from the borrower on the maturity date, which includes both the principal and the interest.

If you invest 10,000 pesos for five years at a simple interest rate of 2% per year, how much will you earn?

At a simple interest rate of 2% per year, investing 10,000 pesos for five years will earn you 1,000 pesos in interest.

If you invest 10,000 pesos for five years at a compound interest rate of 2% per year, how much will you earn?

At a compound interest rate of 2% per year, investing 10,000 pesos for five years will result in a total amount of 11,040.81 pesos after five years.

Why would someone choose to invest in a compound interest account over a simple interest account?

Investing in a compound interest account is generally more beneficial because the interest earned also earns interest, leading to higher returns over time compared to simple interest.

Outlines

00:00

📚 Introduction to Simple and Compound Interest

This video lesson aims to educate viewers on the concepts of simple and compound interest. The objectives include illustrating how to calculate both types of interest and distinguishing between them. The lesson introduces key terms such as lender, borrower, repayment date, maturity date, time or term, principal, and interest rate. It explains that simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest. The video uses the example of a 50,000 investment to demonstrate these concepts.

05:02

💼 Comparing Simple and Compound Interest with an Example

The script presents a hypothetical scenario where a person has 10,000 pesos to invest for five years. It compares the outcomes of investing this amount at a simple interest rate of 2% per year with a cooperative group versus a bank offering a compound interest rate of 2% annually. The video demonstrates the calculation process for both simple and compound interest over the five-year period. The calculations show that with simple interest, the investment grows to 11,000 pesos, whereas with compound interest, it grows to 11,040.81 pesos, illustrating the power of compound interest over time.

10:05

📈 Conclusion on the Growth of Interest

The final paragraph concludes the lesson by comparing the growth of interest in simple and compound interest scenarios. It emphasizes that with simple interest, the interest earned remains constant throughout the investment term, whereas with compound interest, the interest from the previous year also earns interest, leading to exponential growth. The video encourages viewers to share their thoughts in the comments section regarding which type of interest they would choose for their investments. It ends with a call to action for viewers to like, subscribe, and stay updated for more educational content.

Keywords

💡Simple Interest

Simple interest is a financial concept where interest is calculated only on the principal amount, without considering any interest earned on the interest. In the video, this is illustrated by calculating the interest on a 10,000 peso investment over five years at a 2% annual rate, resulting in a total interest of 1,000 pesos. The video uses this concept to contrast it with compound interest, highlighting that in simple interest, the interest rate remains constant throughout the investment term.

💡Compound Interest

Compound interest is a financial concept where interest is calculated on the initial principal, as well as on any accumulated interest from previous periods. The video explains this by showing how the interest earned each year is added to the principal, and the new total becomes the base for the next year's interest calculation. For example, with a 10,000 peso investment at a 2% annual rate compounded annually, the interest earned each year is added to the principal, resulting in a slightly higher total than with simple interest after five years.

💡Principal

The principal is the initial amount of money that is borrowed or invested. In the context of the video, the principal is the starting point for calculating both simple and compound interest. The script uses the example of a 10,000 peso principal to demonstrate how interest calculations differ between the two methods.

💡Interest Rate

The interest rate is the percentage at which interest is charged on a loan or credit, or the rate at which the investment grows. In the video, the interest rate is consistently 2% per year for both simple and compound interest examples. It's a key factor in determining the amount of interest earned over time.

💡Maturity Date

The maturity date is the date when a loan or investment is due to be fully repaid, including all interest. The video mentions this term in the context of when the borrower is expected to return the borrowed amount along with the interest. It's an important concept as it sets the timeframe for the investment or loan.

💡Investor

An investor is a person or institution that provides funds with the expectation of earning a return. In the video, the term is used to describe the party who lends money or invests it, expecting to receive interest or profit. The script contrasts the roles of the lender and the borrower in the context of interest calculations.

💡Borrower

A borrower is a person or institution that takes out a loan or borrows money with the intention of repaying it, often with interest. The video explains the concept in relation to the person who owes money to the lender and is responsible for paying back the principal along with the interest by the maturity date.

💡Creditor

A creditor is a person or institution that lends money and has a claim on the repayment of that money. The video uses this term to describe the lender in the context of simple and compound interest, emphasizing the role of the creditor in the lending process.

💡Accumulated Interest

Accumulated interest refers to the total interest that has been earned over the life of an investment or loan. In the video, this term is particularly relevant to compound interest, where the interest earned each year is added to the principal, and the new total earns interest in the subsequent years.

💡Future Value

Future value is the total amount of money that an investment will be worth at a specific point in the future, considering the effects of compound interest. The video discusses the future value in the context of both simple and compound interest, showing how the final amount differs based on the method of interest calculation.

💡Repayment

Repayment refers to the act of returning borrowed money, along with any interest, to the lender. The video script mentions repayment in the context of the maturity date, explaining that it is the time when the borrower is expected to fully repay the loan, including the principal and the interest.

Highlights

Illustrating simple and compound interest is the main objective of the video lesson.

Simple interest is computed only on the principal amount.

Compound interest is computed on the principal and accumulated interest from previous periods.

The maturity value is the total amount received by the lender on the maturity date.

A lender is a person or institution that provides funds for borrowing.

A borrower is a person or institution that owes money or takes a loan.

The repayment date is the deadline for completely repaying the borrowed money.

The term of the loan refers to the duration for which the money is borrowed.

The interest rate is the annual rate charged by the lender, usually expressed in percent.

The principal is the amount of money borrowed or invested.

A comparison problem is presented to illustrate the difference between simple and compound interest.

In the example, a 10,000 peso investment is considered with different interest rates.

Simple interest calculation is demonstrated with a 2% per year rate.

Compound interest calculation is shown with the same 2% rate compounded annually.

After five years, the total amount with simple interest is 11,000 pesos.

After five years, the total amount with compound interest is 11,040.81 pesos.

Simple interest remains constant throughout the investment term.

Compound interest causes the interest to grow every year as it is added to the principal.

The video encourages viewers to share their thoughts on which interest type is better in the comments.

The video concludes with a call to like, subscribe, and hit the bell button for more tutorial videos.

Transcripts

[Music]

in this video lesson we will discuss

about illustrating simple and compound

interest

our objectives first illustrate simple

and compound interest

and distinguish between simple and

compound interest

so before we discuss about simple

on how to compute simple and compound

interest so

familiar

so first lender or creditor it is a

person or institution

who invests the money or makes the funds

available

so these are lin land institution

who lets people borrow money or it can

be

an investor nagina game

borrower adaptor is a person or

institution who owes the money

or avails of the pants from the lender

so shiram

repayment date or maturity date so it is

a date on which the money borrowed

or loan is to be completely repaid so

it's it's like a deadline or a due date

on payment based on the agreement or

the contract

time or term so it's amount of time in

years the money is borrowed or invested

length of the time between the origin

and the

maturity date so uh

for example or

eternal

[Music]

borrowed or invested on the origin date

so the amount of money borrow

or invested so

capital uh invest

rate it's a annual rate usually in

percent

charged by the lender or rate of

increase of the investment

so it's like in

in what interest rate so mccallum impa

50 000 so that is

great so naikita nothing is usually in

percent

interest in interest

so that is

the amount paid or earned for the use of

money or

massage wagon

okay

so simple interest is the interest that

is computed and the principle

and then added to it discuss nothing and

it could compare

compound interest so compound interest

interest is computed on the principal

and also in the accumulated

pass interest at paksinhabi nominated

maturity value or the future value

this is the amount of 30 years that the

lender received from the borrower on the

maturity date so

no no so after

a certain years na na pagusa panila

so twelve thousand emperor module in

twelve thousand into a thousand maturity

or

the future value

all right so let's say we have a problem

here

suppose you want ten 000 pesos and you

plan to invest it

for five years so a cooperative group

offers two percent simple interest rate

per year a bank offers two percent

compounded

annually so which will you choose and

why so melter in the wang investment

no and then try to choose

ten thousand first using the simple

interest

so

or the origin money is ten thousand at

two percent

so compute nothing in interest

so that is ten thousand multiplied and

nothing so in two percent

converted into decimal so ten thousand

times zero point two

y one so uh it means for one year

no ten thousand times zero point two

times one that is two hundred

so e b sub h on ten thousand more to two

bone and two hundred

in a two percent interest rate

so this is

after two years so four hundred so

two years ten thousand

four hundred in three years so

so ten thousand times zero point two

times 3

that is equal to 600 so a big sub yen

600 so therefore

10 600.

10 000 times 0.2 times 4

that is 800 so after four years i'm

going to i 10 hundred so

kellen bama tata investment mo after

five years so

after five years so mcconaughey

that is ten thousand times zero point

two times five

that is one thousand so a big sub and

after

five years from ten thousand paramount

is eleven

thousand so to move one thousand

yet that is for simple interest so

using compound interest okay using

compound interest

okay same ten thousand times zero point

two times one

okay to move we cannot 200 to move

ten thousand two hundred nano so ten

thousand two hundred

times zero point zero two so

two hundred four so eb

is ten thousand four hundred so ten

thousand four hundred

at ten thousand four hundred four times

zero point zero two so the answer is

280 so from ten thousand four hundred

for

the gangnam two hundred point zero eight

so after

three years impera muna i ten thousand

six hundred twelve point zero

[Music]

612.08 times 0.02

so that is point 212.25 four

so on paramount after four years is ten

thousand

eight hundred twenty four point thirty

two so park the kingdom five years

so ten thousand eight hundred twenty

four point thirty two

times two percent or times point zero

two

that is equal to two hundred sixteen

point forty nine

so a big sub hand pack the thing after

five years

young ten thousand more young

eleven thousand forty point eighty one

so make a basilar simple interest so

let's compare

simple and compound interest so it's a

simple interest

to move in paramount then 1000

using the compound interest

that will be uh 1040.81

so e big sub

hence a simple interest capacity

investigate remains constant throughout

the investment term

in compound interest the interest from

the previous

year also earns interest so that's the

interest grows

every year so

investment in your compound interest

question

invest using simple interest but or

using compound interest so yanyung

is sharing yours a comment section and

ten thousand

and one people using the simple interest

or the compound interest so you can

share your answer

in our comment section

thank you for watching this video i hope

you learned something

don't forget to like subscribe and hit

the bell button

put updated ko for more video tutorial

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