Grade: Senior
Subject: Mathematics

#3306. Credit Purchases

Mathematics, level: Senior
Posted Fri Dec 10 07:52:08 PST 2004 by Cheryl Steadham (
Northside's Family Literacy Program, Easley, SC
Materials Required: Classified ads from newspaper, sales circulars, paper, pencils
Activity Time: Two class periods
Concepts Taught: percents, finding interest, determining monthly payments

Real-Life Connection
Many students will eventually purchase an item on credit. Learning to calculate interest will allow them to become more knowledgeable consumers.

Cognitive Skill

Students will use the formula I=PRT to compute interest and payment amount of various items.

• Inform students that they will learn how to calculate the interest on credit purchases.
• Model how to compute interest using the simple interest formula I=PRT using the principal amount of $1200 @ 8% interest for 2 years (=$192).
• Then use the same principal amount and interest rate changing the time to 4 years ($384). Discuss with students the amount of interest they will save if they purchase the items for two years instead of four.
• Using the above numbers, model how to compute monthly payments for two and four years. (Example: monthly payments for the two year loan are $58 and for four years is $33). Explain that even though the payments are lower, they are paying $192 more to purchase the item.
• Model more situations as needed for understanding.
• Have students work in groups of two. Distribute sales electronic sales circulars to each group. Have each group purchase an electronic item using two interest rates and term variables (you provide the rates and variables). Once they compute the interest have them compute monthly payments for six months and one year (or the variable you choose).

Extension Activity
• Students will use the newspaper classified ads to pretend purchase a vehicle (new or used) of his/her choice. Student will use two varying interest rates and terms of loans. They will compute the interest amounts and monthly payments for each loan.
• I have my students get on the internet and search for rebates and "specials' for the model of car they want to purchase (if buying a new car). One web site you may want them to use is