This is a way to introduce students to compounding continuously.
Compound Interest, Clip 3, 2:55
Differentiating between the monthly and annual growth factor can be confusing for students. Initially the students simply want to multiply the monthly growth factor by 12. Despite a hint about what they had done previously from the teacher, the students still struggle in this case.
In this instance the teacher was pressed for time and had to tell the students that they needed to raise the monthly growth factor to the 12th power. She then informs them how to get their annual growth rate from their growth factor.
As this clip shows, this is a difficult topic for students.
