Three Fifty to Fiftyfive Minute Class Periods
The learner will :
 calculate interest on installment loans.
 calculate monthly payments on installment loans.
 evaluate alternative financing options and make positive decisions.
Anticipatory Set:
As the learners are entering the classroom, be busily looking through car magazines and/or a house magazines. When everyone is seated, holding the magazine in such a way that the learners will be able to see what you are looking at, ask them if they've every given any thought about their dream car or their dream home. After a number of ideas have been shared, ask if they think at some time in the future, they believe that they will be able to buy either their dream house or car with cash? With credit? And is there much of a difference how one goes about buying with cash or credit? Have them share the reasons that they believe as they do.
 Share the information on Buying on the Installment Plan (Attachment One), the interest formula (I=PRT) and demonstrate an installment credit math problem.
 Place the learners in groups of three, distribute and assign each group the Installment Math Problems (Attachment Two). The students will work together as a group to solve the problems. Tell them that they will not only need to find the correct solutions to the various problems, but they will need to make a determination as to whether or not they think it is a good idea for those involved to finance their purchases in this manner, giving rationale for their decision.
 Share the information on Lecture Notes: Purchasing that "Dream" Car (Attachment Three).
 Pair up the learners and distribute an auto sales magazines (These local magazines, can easily be obtained for free at news stands). Ask each group to select a 'dream' car.
 Using one of the 'dream' cars as an example model an installment credit problem for the class Financing a Car Overhead (Attachment Four).
 Have each paired group draw a slip of paper with a dollar amount on it from a container. Tell them that this is the amount they have 'budgeted' to spend on their monthly car payments. Have them find two or three cars in the auto sales magazines that they would be able to purchase and compute the financing for each car using the Financing a Car Assignment (Attachment Five).
 Have each group draw a replica of their favorite selected 'dream' car for display listing somewhere on the car its year, name, make/model and the total amount of money it will ultimately cost if financed over 3, 4, or 5 years period given its 'asking' price and their budgeted allocated monthly car payment.
 Share the information on Lecture Notes: Purchasing that "Dream" House (Attachment Six).
 Pair up the learners and distribute a real estate monthly sales magazine (These local magazines can easily be obtained for free at news stands). Ask each group to select a 'dream' house.
 Using one of the 'dream houses' as an example, model an installment credit problem for the class Financing a House Overhead (Attachment Seven).
 Have each paired group draw a slip of paper with a dollar amount on it from a container. Tell them that is the amount they have 'budgeted' to spend on their monthly house payments. Have them find two or three houses in the real estate monthly sales magazines that they would be able to purchase and compute the financing for them using the Financing a House Assignment (Attachment Eight).
 Have each group draw a replica of their of favorite house for display and list the total cost of the house given the interest rate being charged over the 30 year payment period.
 Distribute copies of the My Future Money Pie Chart at 55 Years of Age Revisited (Attachment Nine) and tell the learners to redraw their anticipated uses of money reflected on their original My Future Money Pie Chart at 55 Years of Age (Attachment Five  Lesson One), if at that time they were to find themselves to be "overextended" with credit payments equal to $ 50,000 annually.
 In writing, have the learners compare the original My Future Money Pie Chart at 55 Years of AgeHomework (Attachment Five  Lesson One) proportions with the one they just drew My Future Money Pie Chart at 55 Years of Age Revisited (Attachment Nine)and respond in writing to these prompts: "How do these proportions of the four possible money usages compare with that of your original drawing? What impact might debt have on Saving, Spending, Investing, and Donating? In what ways might avoiding the abuse of credit be considered a civic virtue and someone who avoids abusing credit be considered a good citizen?
Lesson Developed By:
Sharon LutzKrebillInterest = Principal x Interest Rate x Time (in years)
Example 1: Arthur wants to buy an entertainment center. The cash price is $2850. It can also be purchased in 24 monthly payments of $140 each, with a down payment of $250. How much interest would he pay if he purchased the item on the installment plan?
Interest = Total amount paid – Cash price

3 Years

4 Years

5 Years

Loan Amount




Interest Rate

9%

9%

9%

Interest




Total Cost




Number of Months




Monthly Payment




Length of Loan

3 Years

4 Years

5 Years

Advertised Price of Vehicle




Interest Rate

9%

9%

9%

Amount of Interest




Total Cost




Monthly Payment




Length of Loan

3 Years

4 Years

5 Years

Advertised Price of Vehicle




Interest Rate

9%

9%

9%

Amount of Interest




Total Cost




Monthly Payment




Length of Loan

3 Years

4 Years

5 Years

Advertised Price of Vehicle




Interest Rate

9%

9%

9%

Amount of Interest




Total Cost




Monthly Payment




Below… (1) Attach the slip that you drew. (2) Attach the three car ads you found. (3) Write which car and financing option you would choose and why.
Use the examples given to compute the down payment required to purchase the following vehicles:
4. Cost of Vehicle: $14,000 Total Interest:
APR: 9% Total Loan Amount:
5. Cost of Vehicle: $5000 Total Interest:
APR: 4.5% Total Loan Amount:
6. Cost of Vehicle: $12000 Total Interest:
APR: 5% Total Loan Amount:
7. Cost of Vehicle: $7000 Total Interest:
APR: 7% Total Loan Amount:
8. Cost of Vehicle: $16000 Total Interest:
APR: 11% Total Loan Amount:
9. Cost of Vehicle: $16000 Total Interest:
APR: 11% Total Loan Amount:
10. If you double the down payment what happens to the total cost and payment of the vehicle? What two ways can you lower your monthly payment?
Answers:

30 Years

30 Years

30 Years

30 Years

Price of House





Interest Rate

6%

9%

12%

15%

Payment per $1,000





Total Payment





Total Cost of House





How much would you have to make each month to afford this house? (30%) 




Duration

30 Years

30 Years

30 Years

30 Years

Price of House





Interest Rate

6%

9%

12%

15%

Payment per $1,000 (chart) 




Total Monthly Payment





Total Cost of House





Duration

30 Years

30 Years

30 Years

30 Years

Price of House





Interest Rate

6%

9%

12%

15%

Payment per $1,000 (chart) 




Total Monthly Payment





Total Cost of House





Duration

30 Years

30 Years

30 Years

30 Years

Price of House





Interest Rate

6%

9%

12%

15%

Payment per $1,000 (chart) 




Total Monthly Payment





Total Cost of House





Below… (1) Attach the slip that you drew. (2) Attach the three houses that you found. (3) Write which house you would choose and why.
Now consider a loan for $125,000 at 7% interest. Compute the monthly payment and total cost for a 15, 20, 25, and 30year loan.
Duraton  Monthly Payment  Total Cost 
15 years  
20 years  
25 years  
30 years 
Use the same information as above to fill out the next table. The only exception is the interest rate. It is now 8%.
Duraton 
Monthly Payment 
Total Cost 
15 years 

20 years 

25 years 


30 years 


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