Tasks | Early Adolescence | Finances

Tasks - Early Adolescence

Finances   by Glenys Stade, Hampton SHS

Phase of Development:   Early Adolescence

Learning Area/s:	Mathematics
Strand/s	Number	Chance & Data
Substrand/s	Calculate	Interpret Data
Brief Description:	Using a spreadsheet to answer questions involving money and interest rates.
Expected Outcomes:	Understanding of the use of spreadsheets. Understanding of compound interest and it's effects. Understanding reduced interest.
Context:	Metropolitan Area Senior High School. Devised for a Mathematics Enrichment group which had access to a lab of computers. Students had some background in the use of a spreadsheet.
Learning Activities/ Experience:	Time taken - 4 hours A Spread Sheet Activity sheet shows a series of situations which were posed as questions and answered with the use of a spreadsheet. The students were given assistance with the various aspects of the spreadsheet needed and the mathematics involved. The amount of assistance was reduced across the six questions as their understanding and confidence improved. The Reducible Interest sheet was the task set as assessment.
Resources:	Learning Technologies - Computer with Spreadsheet software

Spread Sheet Activity

Each of the following situations can be modelled using a spreadsheet. The first ones will be done together with your teacher showing you how to set up the spreadsheet. The rest, you will attempt yourself. This activity is to practice using the formulae function of a spreadsheet for solving difficult problems.

1. You asked all your family and friends to give you money for Christmas because you wanted to buy a new printer for your computer and you have absolutely no money of your own. After counting all your money, you find you have $355 and the printer you want is $375. Your parents want to teach you about the value of money so they will not give you the $20. Instead, y ou have to invest the money and earn the extra in interest. The investment you use pays 4.5% pa with the interest added monthly. How long will you have to wait until you have enough money to buy your printer. (Lets hope the price doesn't go up!)

2. Credit cards are one way of paying for things you do not have the money for. Unfortunately, the cost in interest is very high. Some cards advertise 2% per month or this is 24% pa. As we are about to see, the annual percentage rate (APR) is, in fact, higher than this. Find out how much is owed after one year if you started out with $100 and you did not pay off anything. (Interest is added monthly) If the APR was 24%, the amount owing after one year should be $124, what is the APR?

3. Most credit cards add interest daily rather than monthly. Using 24% pa and the fact that there are 365 days in a year, work our the APR.

4. Buying a house is a long term undertaking. Many people take over 20 years to pay off a housing loan. Consider the example of a loan of $100,000 at a rate of 7% pa. Interest is added monthly and repayments are $700 per month. How long will it take to pay off the loan? What was the total amount of interest paid? What was the total amount you paid for your $100,000 load?

5. It is often surprising to people that a small increase in repayments can make a significant difference in the How Long will it take to pay off the loan in question 4, if the repayment was $800 each month. How much money will you save?

6. Repeat this for $900 per month. How much money do you save for the extra $200 per month?

Reducible Interest

You have decided to buy a boat. SHARK'S MARINE has exactly the one you have dreamt of.....For $6,200. You have $1,000 for a deposit, and apply to SHARK'S LOAN SERVICE to lend you the balance i.e. the amount of money you need to borrow to buy the boat. The interest rate for the loan is 24% with quarterly repayments of $500. How much do you need to borrow? What is the quarterly interest rate? Copy and complete the table showing all the necessary calculations for 3 years. Did you pay off your loan in three years? If not, how much is still owing after 3 years? Continue with the table until the loan is paid off. What is your final repayment? What is the total interest paid for the loan? If another company give you the same loan at the same interest rate but reducible monthly, which one will you choose? Why? (You must explain your choice.) Quarters Principal Interest Repayment Amount Owing 1         2         etc