Grades K-2, 3-5, 6-8, 9-12
Students will be able to:
- Calculate simple interest on loans.
- Assess the cost of borrowing funds to make a purchase.
In this personal finance lesson, students will use I=P(r)(t) to calculate simple interest on a loan.
Ask students if they have ever borrowed money to buy a car. Or if they know someone who has. Have them identify potential places to borrow money, such as banks, credit unions, finance companies, etc. Remind them that borrowers are required to pay interest on loans, which increases the overall price of the car or product they are financing.
Using the PowerPoint and notes, introduce students to Oliver and his decision to buy a car. Tell them they will be learning the simple interest formula to determine how much interest Oliver is paying on his loan and the total amount of money that he is paying for his new car. After completing this example, ask students if they have any questions before proceeding.
Put students into small groups. Tell them they will be working together to find a vehicle listed for sale on a reliable web site, such as Autotrader.com. or one of their local dealerships. Explain they will use the following information to calculate the amount of simple interest and the total amount they will pay for the vehicle they selected: 4 % interest for 36 months (3 years). Review their answers. Then, have them recalculate the simple interest and total amount paid if they financed the car for 60 months (5 years) like Oliver did. Ask them to compare the two amounts, identifying the advantages and disadvantages of the two loans. Remind them that the monthly payments on the two loans would also vary, with the 5 year loan having lower payments than the 3 year loan.
Tell students that understanding how to calculate interest rates will allow them to compare different loan options. Distribute copies of Individual Activity to students. Review the directions for completing the assignment. Debrief the answers [INSERT KEY] and answer any questions students may have about the activity.
Using Quizzizz, assess student mastery of calculating simple interest. Use this creation guide to make the Quizzizz.
Have students do an online search for current interest rates on vehicles. They may want to compare rates from a local credit union, bank, and car dealership.
Put students in small groups and have each group research factors that affect interest rates. Allow time for them to discuss their findings with the class.