Two ways coins grow

In the picture

1. 1A short stack of coins: the money set aside at the start
2. 2The tallest stack in the steady row: the same fixed interest added every year
3. 3The middle stack in the rising row: interest worked out on a balance that already includes earlier interest
4. 4Loose coins resting on the tallest stack: interest that goes on to earn further interest

Examples

• A savings account paying 5% a year on 1,000 euros.
• A loan where unpaid interest is added to what you still owe.

Quiz: Two ways coins grow (Age 18)

1. 1

   In simple interest, how does the amount added each year change?

   • It gets bigger each year.
   • It gets smaller each year.
   • It stays the same each year.
2. 2

   In compound interest, what is the interest worked out on?

   • Only the original amount first put in.
   • Only the interest from the previous year.
   • The whole current balance, including interest already added.
3. 3

   What happens to compound interest growth when money is left alone for longer?

   • It grows faster.
   • It stays exactly the same each year.
   • It stops after the first year.

The answers, each with its explanation, are in the app. This lesson has left the free week, so its quiz is part of the subscription.