All A Loan – Part 2 compound loans
Teacher Background: Students will use
their M&Ms data from All A Loan – Part 1 to
gain a rudimentary understanding of how compound
interest rates are calculated. Please be sure to explain
that these rates are not necessarily current interest rates!
Goals: To understand how interest compounds over time
to help determine which loan option works best for
individual building projects and justify the decision
Standards met:
Number & Operations


Objectives: Students will…..





Practice percent skills
Change percent into decimals
Multiply decimals
Use a chart to determine percent over time
Use decimals to determine project costs
Prep:






Connections:

Make a transparency of the Compound Interest
Chart
Make copies
Procedure:


work flexibly with fractions,
decimals, and percents to
solve problems
understand the meaning and
effects of arithmetic
operations with fractions,
decimals, and integers
select appropriate methods
and tools for computing with
fractions and decimals
Recognize & apply
mathematics in context
outside of class
Time required:

50-minute class period
Explain to students that they will need to take a
loan from the bank in order to build their homes
The loan will require them to pay compound
Materials: (for 30)
interest
o For this lesson, the student’s rate is
 30 copies All A Loan –
determined by the M&M color they were
M&Ms Compound
Interest Chart
given. See the student sheet for color rate

1 overhead transparency
Go over terms:
All A Loan – M&Ms
o Interest is a fee you pay the bank to borrow
Compound Interest
money. It is calculated by multiplying your
Chart
borrowed amount by an agreed upon
percent
o Compound interest is paid on the amount
borrowed and on interest you owe
Give each student a copy of All A Loan – M&Ms Compound Interest Chart
Using a transparency, explain the example on the table
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7.1
Review the definition of percent and the relationship between decimal
and percent
Have students complete the student table
Share findings
Discuss how this might impact a person trying to get a loan
o For example, people shop around to find the lowest rate, people want
to find a banker who can calculate the compound interest, and people
may get educated before going to a bank so they don’t get a bad
deal…
o



Assessment:

All A Loan – M&Ms Compound Interest Chart
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7.2
All A Loan 2 – M&Ms Compound Interest Chart
SAMPLE CHART: Pink
Principal
(Borrowed
Amount)
$100,000
Interest
Rate
Time Passed
(1 year
increments)
Per.
Frac.
Dec.
5%
5
100
.05
1
Your
Interest
(I=Prt)*
100,000 x .05 x
1 = $5,000
TOTAL
AMOUNT
OWED
(Principal +
Interest)
100,000 +
5,000 =
$105,000
$105,000
5%
5
100
.05
.05
1
105,000 +
5,250 =
$110,250
$110,250
5%
5
100
.05
1
110,250 x .05 x
1=
110,250
+5,512.25 =
$5,512.25
$115,762.25
*Interest = Prt (principal x rate x time)
Principal
(Borrowed
Amount)
Interest
Rate
Brown = 30%
Red or Yellow = 20%
Orange, green, tan = 10%
Per.
Frac.
Time Passed
(1 year
increments)
Dec.
$100,000
Your
Interest
(I=Prt)*
TOTAL
AMOUNT
OWED
(Principal +
Interest)
1
1
1
*Interest = Prt (principal x rate x time)
©2010 Beyond Benign, All Rights Reserved
7.3
All A Loan 2 – M&Ms Compound Interest
Chart – Teacher Key
Principal
Interest
(Borrowed
Rate
Amount)
Brown = 30%
Time
Passed
Red or Yellow = 20%
Your
Interest
(1 year
(I=Prt)*
increments)
TOTAL
AMOUNT
OWED
(Principal +
Interest)
Orange, green, tan =
10%
$100,000
30%
30
100
.30
1
100,000 x .30
x 1 = $30,000
100,000 +
30,000 =
$130,000
$130,000
30%
30
100
.30
1
130,000 x .30
x 1 = $39,000
130,000 +
39,000 =
$169,000
$169,000
30%
30
100
.30
1
169,000 x .30
x 1 = $50,700
169,000 +
50,700 =
$219,700
*Interest = Prt (principal x rate x time)
©2010 Beyond Benign, All Rights Reserved
7.4
Principal
Interest
(Borrowed
Rate
Amount)
Brown = 30%
Time
Passed
Red or Yellow = 20%
Your
Interest
(1 year
(I=Prt)*
increments)
TOTAL
AMOUNT
OWED
(Principal +
Interest)
Orange, green, tan =
10%
$100,000
20%
20
100
.20
1
100,000 x .20
x 1 = $20,000
100,000 +
20,000 =
$120,000
$120,000
20%
20
100
.20
1
120,000 x .20
x 1 = $24,000
120,000 +
24,000 =
$144,000
$144,000
20%
20
100
.20
1
144,000 x .20
x 1 = $28,800
144,000 +
28,800=
$172,800
Principal
Interest
Your
(Borrowed
Rate
Time
Passed
TOTAL
AMOUNT
OWED
Amount)
Brown = 30%
Red or Yellow = 20%
Interest
(1 year
(I=Prt)*
increments)
(Principal +
Interest)
Orange, green, tan =
10%
$100,000
10%
10
100
.10
1
100,000 x .10
x 1 = $10,000
100,000 +
10,000 =
$110,000
$110,000
10%
10
100
.10
1
110,000 x .10
x 1 = $11,000
110,000 +
11,000 =
$121,000
$121,000
10%
10
100
.10
1
121,000 x .10
x 1 = $12,100
121,000 +
12,100 =
$133,100
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7.5