Prior to the financial literacy unit in math this semester, I did not know much about interest, investment, loan, mortgage, or lease calculations. I knew about interest; however, I did not know much about simple interest or compound interest. Subsequent to our first lesson on interest, simple interest felt familiar – and it was quite easy to calculate – but I would not have been able to name it or explain it then as I currently can. I also knew about mortgages, but I did not know how to calculate them.
Although this financial literacy unit was quite compact, I feel that it was a valuable lesson, because it is applicable to everyone’s life. From this unit, I learned about simple interest, which is interest that is repeatedly calculated based on the initial investment, and compound interest, which is interest that is calculated based on the initial investment + any interest that has already been applied to the initial investment. Relatively, I learned the compound interest formula [A = P(1 + i)n] that can calculate the final amount for investments or loans when given the initial principal (P), the interest rate per compounding period (i), and the number of compounding periods (n). TVM financial calculators were also used extensively, and I have learned how to utilize them in instances where people are making payments at monthly intervals to repay their loans, mortgages, and leases. Aside from these calculations, I learned several facts about credit cards, which I should have known but did not: there is no interest charge when the balance on the card is paid off by the agreed date, interest is charged when the balance on the card is not paid off by the agreed date, interest rates applied to items that were purchased with credit cards are higher than interest rates on small loans or mortgages, and a minimum payment must be made each month based on a credit card balance. Similarly, I learned several facts about credit card charges: the credit card balance must be paid 21 days after the statement date, an interest rate of 18-20% per annum is charged on the entire monthly balance if the entire balance was not paid by the due date, and the minimum payment is either 3% of the statement balance or $10 (whichever amounts to the highest value is chosen). For mortgages, I learned the difference between the term (the length of time before a new mortgage agreement is arranged) and the amortization period (the length of time for a mortgage to be paid off). For leases (and certain loans), I learned to apply GST (5%) and PST (7%); for leases, these taxes are applied to the monthly payment and the down payment, but for the down payment, it is divided by the number of payments in the lease once the taxes are applied. For certain loans, these taxes are applied to the total purchase price of the item (i.e. a vehicle) that someone is trying to attain.
Overall, I thoroughly enjoyed this unit, and I am grateful that I was given the opportunity to become familiar with these financial terms and a TVM financial calculator.