Minds On

Task: Dream purchase

Student Success

Think-Pair-Share

Think about a dream purchase that you have, but do not have enough money to buy right now. What is it? How could you get the money for it?

Develop a plan for how you can get your dream purchase.

If possible share your plan with a partner.

Note to teachers: See your teacher guide for collaboration tools, ideas and suggestions.

Action

Task 1: Lending vs. borrowing

What are some large purchases that people make that they may not have the money for all at once?

  • Cars
  • Houses/condos
  • To start a business

Brainstorm

Brainstorm

What does someone do if they do not have all the money required for their purchase?

You can borrow money. However, to borrow money, there is usually a cost.

What does it mean to lend money? What does it mean to borrow money?

Lending money refers to a situation where someone gives money to someone else with an agreement to be repaid for this money in the future. Usually, the lender will charge interest.

Borrowing money refers to a situation where someone receives money from someone else with an agreement to repay it in the future, usually with interest charged.

Interest is what someone pays in return for someone lending them money. It is the cost to borrow money.

For example, if someone lends a friend $500.00 and charges them interest at 10%, they would have to pay $50.00 of interest. This means that in addition to paying them back the original $500.00, the friend now also owes them that extra $50.00. If they only charge the friend 5% interest, the friend would have to pay $25.00

Press ‘How can you calculate interest?’ to review interest calculation.

Step 1: turn 1% into a decimal

Step 2: multiply that decimal by the amount

Step 3: add the amount of interest paid to the amount of the bill

Brainstorm

Brainstorm

Brainstorm with a partner, if possible, where can someone go to get a loan? Record your ideas in an oral recording or in writing.

Task 2: Taking out loans

Before an individual takes out a loan, there are different factors they need to think about. They need to consider:

  • What interest rate will they be charged? Are the same interest rates charged for all loans?
  • How long will they have to pay back the loan?

Before being approved for a loan, the lender will be checking if the borrower has paid their bills properly in the past. People who have paid their bills properly have what is called a good credit rating. A lender would not want to loan out their money to someone who is not likely to pay it back.

We are going to examine a scenario related to loans. Work with a partner, if possible, to complete the calculations using the following fillable and printable documents, or your notebook.

Press the ‘Activity’ button for your note-taking document.

Activity (Open PDF in a new window)

A flute player wants to buy a car to get to practice. They have researched the cost of various cars and has determined that the car they have chosen will cost $25,600.00 Right now, they have saved $15,000.00 to use for the car purchase.

  • How much more money does the flute player need to be able to purchase the car?
  • Once they determine how much money they still need, what are their options for getting the rest of the money?
  • The flute player decides to take out a loan. What are some factors they should research before determining where to take out their loan?
  • The flute player takes out a loan of $10,600.00. They will be charged 5% interest annually. In the first year, how much interest will be charged?
  • After the first year, the flute player has paid back $5,000.00. They now only owe $5,600.00. How much interest will they now be charged in the second year?
  • The Flute player has now paid the loan in full after the second year. How much money did they end up paying for the car in total?

Task 3: Your loan

Student Success

Think-Pair-Share

Now that we have worked through a scenario together, try one on your own. Explain your thinking. You can use a calculator to help you. You can use your notebook or the following fillable and printable document.

Press the ‘Activity’ button for your note-taking document.

Activity (Open PDF in a new window)

An editor wants to buy a condominium. They have done some research and found a condominium they would like to buy. It costs $689,000.00. They have saved $100,000.00 to use for the condominium purchase.

  • How much more money do they need to be able to buy the condominium?
  • Once they decide how much money they still need, what are their options for getting the rest of the money?
  • The editor decides to take out a loan. What are some factors they should research before deciding where to take out their loan?
  • The editor takes out a loan. They will be charged 4% interest per year. In the first year, how much interest will be charged?
  • It takes the editor 15 years to pay the loan in full. Figure out how much they have paid in interest over the 15 years at a rate of 4% per year. How much money did they end up paying for the condominium in total?

Note to teachers: See your teacher guide for collaboration tools, ideas and suggestions.

Consolidation

Task 1: Create your own loan

Create a scenario that involves someone taking out a loan to make a big purchase. Use the Internet to explore the current interest rates for loans at different Canadian banks. Record your scenario using a method of your choice. Make sure to include the following:

  • What is the purchase?
  • How much does it cost?
  • What is the amount of the loan they are taking out?
  • What is the interest rate?
  • How much interest are they being charged?
  • How long will it take to pay off the loan?

Reflection

As you read through these descriptions, which sentence best describes how you are feeling about your understanding of this learning activity? Press the button that is beside this sentence.

I feel...

Now, record your ideas using a voice recorder, text-to-speech, or writing tool.

Join the conversation

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