Comparing Interest Rates & Loan Length

T.i.P.S.

Students should use their knowledge of numbers and operations to find the total cost of loans using several different interest rates and loan lengths. Students should then compare the different interest rates and loan lengths to determine how the interest rate and length of time affects the total cost of the loan and which loan would be a more responsible choice for their financial situation.

Example

Steve is taking out a loan in the amount of $5,000. His choices for the loans are 3-year loan at a 5% simple interest rate and a 5-year loans at a 4% simple interest rate. What is the difference in the amount of interest Steve would have to pay for each of these two loans? 

Hint

Possible Solution 

TEKS

Supporting Standard 8.12 Personal financial literacy. The student applies mathematical process standards to develop an economic way of thinking and problem solving useful in one's life as a knowledgeable consumer and investor. The student is expected to:
(A) solve real-world problems comparing how interest rate and loan length affect the cost of credit

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