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    CH 8 Interest Fees Student Activity

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    pewinskih
    This document is an activity sheet for a personal finance course that has students use an online interest fees calculator to analyze the costs of different debt scenarios over time and the potential benefits of avoiding debt and investing instead. The scenarios include credit card debt from college, auto loans, student loans, and investing monthly payment amounts in mutual funds over 42 years. The activity aims to demonstrate how debt can significantly reduce long-term investment returns and wealth accumulation.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    CH 8 Interest Fees Student Activity

    Uploaded by

    pewinskih
    33 views4 pages
    This document is an activity sheet for a personal finance course that has students use an online interest fees calculator to analyze the costs of different debt scenarios over time and the potential benefits of avoiding debt and investing instead. The scenarios include credit card debt from college, auto loans, student loans, and investing monthly payment amounts in mutual funds over 42 years. The activity aims to demonstrate how debt can significantly reduce long-term investment returns and wealth accumulation.

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    CH 8 Interest Fees Student Activity(1)

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    This document is an activity sheet for a personal finance course that has students use an online interest fees calculator to analyze the costs of different debt scenarios over time and the potential benefits of avoiding debt and investing instead. The scenarios include credit card debt from college, auto loans, student loans, and investing monthly payment amounts in mutual funds over 42 years. The activity aims to demonstrate how debt can significantly reduce long-term investment returns and wealth accumulation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    33 views4 pages

    CH 8 Interest Fees Student Activity

    Uploaded by

    pewinskih
    This document is an activity sheet for a personal finance course that has students use an online interest fees calculator to analyze the costs of different debt scenarios over time and the potential benefits of avoiding debt and investing instead. The scenarios include credit card debt from college, auto loans, student loans, and investing monthly payment amounts in mutual funds over 42 years. The activity aims to demonstrate how debt can significantly reduce long-term investment returns and wealth accumulation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    C HAP T E

    8
    R
    Activity:
    Interest Fees Calculator (1/4)

    Name Date

    Objective
    The purpose of this activity is to calculate various interest fees and analyze the
    impact of debt over time.

    Directions
    Go to www.foundationsU.com for the Interest Fees Calculator (under Tools).

    You will complete three different debt scenarios, as well as one investing scenario. Please print out the four calcu- lator results to
    turn in, along with this activity sheet.

    Scenario 1:
    You are a senior in college preparing for life after graduation. During the last four years, you relied heavily on your credit card to get
    you through school. You used it for food, clothes, books, computer equipment, phone charges, and various utility payments. The
    balance is currently $12,580 and grows steadily as you near graduation. Your monthly payment is $325 and the interest is
    18.99%. Adjust the calculator to show these amounts.

    How much will you pay in interest alone (over the original balance of $12,580)?
    What are the benefits of paying for these expenses with cash or a debit card?

    FOUND A TIONS IN PERSON AL FIN ANCE COLLEGE EDITION CHAPTER 8: CREDIT B UREA US
    C HAP T E

    8
    R
    Activity:
    Interest Fees Calculator (2/4)
    Scenario 2:
    Your parents always leased cars ever since you can remember. As a result, leasing is the only way you know to live, so you follow
    suit. To reward yourself for graduating college, you get yourself a new car worth $26,000. The interest rate is 7.5% and you pay
    $490 a month. Like many car leases, six years from now your car will finally be paid off.

    Adjust the calculator to show these amounts.

    How much will you pay in interest alone (over the original balance of $26,000)?

    If you continued this leasing pattern ($26,000 every six years) for the next 42 years until retirement, with a monthly payment of
    $490 and the interest rate at 7.5%, how much would you pay in interest in that time? (Multiply the inter- est fees by seven)

    What are the benefits of paying cash for a car?

    What are the benefits of buying a used car?

    Scenario 3:
    Now that graduation has arrived, you realize you have six months until you have to start paying off the student loans you
    accrued during college. Your student loans total $19,000 and your interest rate is 6%. When you begin making payments, you will
    pay $285 a month for the next 10 years. Adjust the calculator to show these amounts.

    How much will you pay in interest alone (over the original balance of $19,000)?
    What are the benefits of avoiding student loans?

    FOUND A TIONS IN PERSON AL FIN ANCE COLLEGE EDITION CHAPTER 8: CREDIT B UREA US
    C HAP T E

    8
    R
    Activity:
    Interest Fees Calculator (3/4)
    Scenario 4:
    You decide to become very wealthy and “Live like no one else so that later you can LIVE like no one else.” As a result, you
    pay cash for all of your living expenses and invest the money you would have spent on interest fees in mutual funds instead. You
    avoid using credit cards, auto loans and student loans so that you can keep your hard- earned cash. This is your game plan from
    college graduation until you retire 42 years from now.

    Debt destroys your investing potential, and you’re about to see how deep this damage goes. Locate the Investing Calculator
    (under Tools) to calculate the result of avoiding debt and investing that money instead.

    First, plug in the a monthly credit card payment of $325 over 42 years at 12% interest (See Chapter 10 on Investments if you
    need proof that 12% is a reasonable return). How much will this investment be worth 42 years from now?

    Second, enter your monthly car payment of $490 over 42 years (which is seven car leasing cycles) at 12%. How much will this
    investment be worth 42 years from now?

    Third, enter your monthly student loan payment of $210 over 10 years at 12%. How much will this investment be worth 42
    years from now?

    Now total the three types of investments. What is the grand total?

    Final Questions:
    Do you feel avoiding debt is worth the effort when you consider a future in investing?

    How can you apply this information in your life today?

    FOUND A TIONS IN PERSON AL FIN ANCE COLLEGE EDITION CHAPTER 8: CREDIT B UREA US
    C HAP T E

    8
    R
    Activity:
    Interest Fees Calculator (4/4)
    If you already have student loans, credit cards or car loans, is it too late to become wealthy? What can you do to accomplish
    this?

    FOUND A TIONS IN PERSON AL FIN ANCE COLLEGE EDITION CHAPTER 8: CREDIT B UREA US

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