MA.912.FL.3.8

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Calculate using spreadsheets and other technology the total cost of purchasing consumer durables over time given different monthly payments, down payments, financing options and fees.

Examples

Example: You want to buy a sofa that cost $899. Company A will let you pay $100 down and then pay the remaining balance over 3 years at 15.99% interest. Company B will not require a down payment and will defer payments for one year. However, you will accrue interest at a rate of 18.99% interest during that first year. Starting the second year you will have to pay the new amount for 2 years at a rate of 26 % interest. Which deal is better and why? Calculate the total amount paid for both deals. 

Example: An electronics company advertises that if you buy a TV over $450, you will not have to pay interest for one year. If you bought a 65’ TV, regularly $699.99 and on sale for 10% off, on January 1st and only paid $300 of the balance within the year, how much interest would you have to pay for the remaining balance on the TV? Assume the interest rate is 23.99%. What did the TV really cost you?

General Information
Subject Area: Mathematics (B.E.S.T.)
Grade: 912
Strand: Financial Literacy
Standard: Describe the advantages and disadvantages of short-term and long-term purchases.
Date Adopted or Revised: 08/20
Status: State Board Approved

Benchmark Instructional Guide

Connecting Benchmarks/Horizontal Alignment

 

Terms from the K-12 Glossary

 

Vertical Alignment

Previous Benchmarks

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Purpose and Instructional Strategies

In Math for Data and Financial Literacy, students analyze multiple payment options for a purchase. 
  • Instruction allows for students to explore multiple real-world scenarios involving consumer durables (items that are durable and last long periods of time before needing to be replaced). Purchases to explore include but are not limited to furniture, appliances, electronics, tools, computers, or automobile purchases. When considering these purchases, allow students to research for real-time financing options. 
    • For example, if you’re considering the purchase of a couch, search the financing options of three major furniture providers and let students calculate which has the better deal. 
  • Given the volume of consumer durable purchases students may make in the future, have students consider the benefits of saving up for purchases as compared to financing them. Many of these purchases are not immediate needs and can be delayed until students can pay for them in full. 
  • In addition to comparing purchasing options for a given consumer durable, have students factor potential monthly payments into a hypothetical household budget (MA.912.FL.2.5). Students should consider whether having other financed items (student loans, mortgages, car loans) would they have the margin to make a given purchase. 
  • While exploring financing options, look for fine print that says that minimum monthly payments may be less than the amount needed to pay off the loan by the end of the interest free period. Ask students why lenders would set the payments up this way.

 

Common Misconceptions or Errors

  • Students may miss that many finance options back charge interest for the full beginning principle, even if some of the principle has been paid off during an “interest free” period. 
  • Students may not use periodic interest in their calculations and may use the APR.

 

Instructional Tasks

Instructional Task 1 (MTR.4.1) 
  • Sasha wants to purchase a new bedframe and mattress for her bedroom that costs $3975. The furniture store offers an 18-month financing plan where no interest is charged if the purchase is paid off in 18 months. If the purchase is not fully repaid, interest will be charged on the full purchase price at an APR of 29.99%. 
    • Part A. If Sasha makes $100 payments each month, what will the balance of the loan be after month 18? 
    • Part B. What would her minimum monthly payment need to be to not incur any interest charges? 
    • Part C. How much would she have saved in interest by making this payment? 
    • Part D. What would be the advantages and disadvantages of using this finance option versus saving up and paying with cash?

Instructional Task 2 (MTR.5.1) 
  • Audrey is shopping for a new car. The model she wants is $28,000. Explore the following financing options and discuss the advantages and disadvantages of each. 
    • Part A. Audrey’s local credit union offers a 48-month or a 60-month loan at 2.99%. Calculate the estimated monthly payment and total interest charge for each option. 
    • Part B. The dealership offers a 72-month loan at 3.74%. Calculate the estimated monthly payment and total interest charge  Audrey would pay. 
    • Part C. The dealership offers an 84-month loan at 4.82%. Calculate the estimated monthly payment and total interest charge Audrey would pay. 
    • Part D. If the car loses 20% of its value in the first year of ownership and around 15% each year afterwards, calculate the amount of time for each purchase option it would take before the worth of the car exceeded the balance of the car loan.

 

Instructional Items

Instructional Item 1 
  • Alfonso considers buying a new gaming desktop computer at a local electronics store for $1449.99. He calculates he has $100 per month in discretionary funds he can use to pay for the computer. He considers two purchase options:
    1) using his credit card (with an APR of 18.99%) to make the purchase or
    2) using a 12-month interest free loan from the electronics store with an APR of 27.99% applied to original purchase price if not fully paid in 12 months.
    Which option would be better? Explain your reasoning.

*The strategies, tasks and items included in the B1G-M are examples and should not be considered comprehensive.

Related Courses

This benchmark is part of these courses.
1200388: Mathematics for Data and Financial Literacy Honors (Specifically in versions: 2022 and beyond (current))
1200384: Mathematics for Data and Financial Literacy (Specifically in versions: 2022 and beyond (current))
7912120: Access Mathematics for Data and Financial Literacy (Specifically in versions: 2022 - 2023, 2023 and beyond (current))

Related Access Points

Alternate version of this benchmark for students with significant cognitive disabilities.
MA.912.FL.3.AP.8: Given the total cost of an item purchased using two different payment plans, calculate the total cost difference of the item between payment plans.

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