In this lesson, students will develop an understanding of interest, learn how to calculate interest on loans, and comprehend that interest is added onto the principal of the loan and can necessitate additional income for repayment. Students will also learn key terms associated with loans. They will then watch a clip of WHAT'S UP IN FINANCE? to see how a small-business owner named Anna successfully receives a loan, then needs additional cash flow to repay it and cover the interest expense. Students will complete hands-on activities involving choosing appropriate loans for a variety of business needs. Afterward, students will use the online T-shirt business interactivity, "Rags to Riches," to utilize the concepts they have learned, and integrate their knowledge of loans into a scenario involving loan repayment in a small-business enterprise.
Finally, students will discuss the concept of sustainability in a business context, and will discover how sustainable business practices can support the profitability of a business. Students will study a hypothetical company profile to discuss potential sustainable business practices the company could adopt, and will think about how these might also save money for the company.
4 classes at 45 minutes per class
Math, Finance, Economics
Students will be able to:
- Understand the components of a loan
- Understand the concept of interest
- Compute interest using percentages
- Compute monthly repayment installments for a loan
- Learn about scenarios that might require small businesses to take out loans
- Recognize the need for additional revenue to cover the cost of loan repayment
- Understand the value of sustainable business practices
- National Council of Teachers and Mathematics
Principles and Standards for School Mathematics
Number and Operations
- Understand numbers, ways of representing numbers, relationships among numbers, and number systems;
- Understand meanings of operations and how they relate to one another;
- Compute fluently and make reasonable estimates.
- Build new mathematical knowledge through problem solving;
- Solve problems that arise in mathematics and in other contexts;
- Apply and adapt a variety of appropriate strategies to solve problems;
- Monitor and reflect on the process of mathematical problem solving.
- Organize and consolidate mathematical thinking through communication;
- Communicate mathematical thinking coherently and clearly to peers, teachers, and others;
- Analyze and evaluate the mathematical thinking and strategies of others;
- Use the language of mathematics to express mathematical ideas precisely.
JumpStart Coalition for Personal Financial Literacy
- Create and use representations to organize, record, and communicate mathematical ideas;
- Select, apply, and translate among mathematical representations to solve problems;
- Use representations to model and interpret physical, social, and mathematical phenomena.
Students will be able to:
Mid-continent Research for Education and Learning (McREL)
Benchmarks for Economics
- Explain how limited personal financial resources affect the choices people make.
- Identify the opportunity cost of financial decisions.
- Discuss the importance of taking responsibility for personal financial decisions.
- Apply a decision-making process to personal financial choices.
- Explain how inflation affects spending and investing decisions.
- Describe how insurance and other risk-management strategies protect against financial loss.
- Design a plan for earning, spending, saving, and investing.
- Explain how to use money-management tools available from financial institutions
Understands that scarcity of productive resources requires choices that generate opportunity costs
Understands savings, investment, and interest rates
RAGS TO RICHES
The goal of this game is to launch and run an online T-shirt business, with the help of a loan from a bank. The screens of the game simulate the passage of time in a 12-week business quarter, with each screen presenting a new business scenario or challenge involving issues that impact the company's revenue and expenses. The player can keep track of the company's success by tracking its profit, expenses, and loan standing. At the end of the game, a quarterly report is generated summarizing the business's performance.
Sustainability Web sites
(for the Culminating Activity)
Vehicles and fuel
The office environment
Teachers will need the following supplies:
Students will need the following supplies:
- Computer with connection to a screen or television on which to project the Web-based video clip, or computer stations where students can watch the clip
- Board and/or chart paper
- "Loan Components" Teacher Organizer
- Teacher Answer Key
PREP FOR TEACHERS
- Bookmark the Web sites used in the lesson on each computer in your classroom, or upload all links to an online bookmarking utility such as www.portaportal.com.
- Preview all of the video clips and Web sites used in the lesson to make certain that they are appropriate for your students, currently available, and accessible from your classroom.
- Download the video clips used in this lesson onto your hard drive or portable storage device, or prepare to stream the clips from your classroom.
- Print out the "Loan Components" Teacher Organizer to copy the terms and definitions on the board. Print the Teacher Answer Key for reference.
- Print out the Student Organizers: "Loan Calculation," "Company Cards," and "Sustainable Business," and make enough copies so that each student has one copy of each organizer.
- When using media, provide students with a FOCUS FOR MEDIA INTERACTION, a specific task to complete and/or information to identify during or after viewing of video segments, Web sites, or other multimedia elements.