Students will learn about simple interest and how to calculate the real cost of a loan, credit card, and other types of borrowing.
Objectives & Outcomes:
The students will be able to calculate the total value of their loan, including interest payments.
Opening to Lesson:
1) Have several examples of interest rates shown to the students on a chart or list.
2) After students have accepted that they will pay some kind of interest for loans, credit cards, or money they spend, hand out loan applications for car, student loan, and credit cards.
3) Have the students fill out the applications.
4) After they have completed the application, have each student show other students what they have written down for the amount borrowed, interest rate, and payment.
5) Have the students add their monthly payment to the amount borrowed to determine the total amount that they owe.
Body of Lesson:
1) Ask students if they have ever seen advertisements or due dates on bills for auto or student loans.
2) Explain to students that their payment each month will be more than the amount of the loan.
3) Demonstrate this by using a calculator to compute the amount of interest added on to the loan for each payment.
4) Have students add the interest amount to their monthly payment.
5) This will illustrate how much they actually will be paying in interest for the loan.
1) Have the students bring forth their worksheets to show how much money they actually owe on the loan and the real cost of the loan.
2) To do this, have the students add the amount borrowed and the monthly payment to see the total amount that they actually owe for the loan.
3) The students will also learn the formula for compound interest and be able to calculate the real cost of borrowing.
Students will practice calculating the real cost of borrowing money. Students may do this by:
1) Finding an advertisement for a credit card and calculating how much they will actually be paying for the items they purchased.
2) Locate a loan payment schedule for a vehicle and calculating the amount of interest that is added to the monthly payment.
Draw a diagram with the following examples:
1) Negative Charge:
2) Negative Loan:
3) Positive Charge: