How do you work out compound interest?

Check whether student can calculate simple interest, e.g. How much money would you have after 1 year if you have £50 and get 3% interest? (Ans: 50*1.03 = 51.50)

Once this is understood get them to calculate what the interest would be after two years, i.e. 51.50*1.03 = 53.045.

Point out that this is 501.03^2, so in general after n years you have 501.03^n.  Do example question with n~5 to consolidate.