Loan shaRKS: Culminating Task

Overview

Title

Personal Finance Portfolio

Rational

The purpose of this culminating activity is to offer students an opportunity to apply and demonstrate their knowledge and skills in a small group study of Personal Finance. For this Personal Finance Portfolio students complete the culminating activity sheets on 5 main streams of Personal Finance: Savings Alternatives, Investment Alternatives, Manage Credit Cards, Obtain a Vehicle and Operate a Vehicle.

Description

A Personal Finance Portfolio allows students to apply their knowledge and to expand student thinking skills on making right choices when saving, investing, using credit cards and purchasing a car. It stimulates student’s interest in mathematics because it allows students to explore real-life scenarios.

Overall Curriculum Expectations

1. compare simple and compound interest, relate compound interest to exponential growth, and solve

problems involving compound interest

2. compare services available from financial institutions, and solve problems involving the cost of making

purchases on credit

3. interpret information about owning and operating a vehicle, and solve problems involving the

associated costs

Final Summative Evaluation

Students in pairs hand in the final copy of collective works which will be evaluated using the Personal Finance Portfolio Rubric. Their presentation should be no longer than 10 minutes.

The Hard Copy of Personal Finance Portfolio is DUE: FRIDAY, MAY 19^th 2012
The Group Presentation is DUE: MONDAY, MAY 22^nd AND 23^rd 2012

Culminating Activity Worksheets

Part 1 Saving for the Future

Instruction

Work with your partner and complete the table to compare the interest rate earned on $1000 deposited in saving accounts from the three given financial institutions. You will need to explore their websites and gather the information you need. Use the compounded interest formula to calculate your interest and future value. (I=FV-PV, FV=PV (1+i) ^n)

Interest Earned Comparison

Financial Institution	Name of Saving Account	Interest Rate the Account	Future Value	Interest Earned in One Year (FV-PV)
Royal Bank of Canada	High Interest E-Saving Account
Bank of Montreal
TD Canada Trust

Service Cost Comparison

Financial Institution	Name of Saving Account	Fee of Each Debit Transaction	Fees of 10 Debit Transactions of this Saving Account	Fees of 10 Debit Transactions of the Basic Checking Account of this Bank
Royal Bank of Canada	High Interest E-Saving Account			$4
Bank of Montreal
TD Canada Trust

Summary Question: Which saving product is a better option considering both interest earnings and service cost of regular (10 debit transactions) use?

Knowledge and Understanding	Thinking and Inquiry	Communication	Application
20%	15%	30%	35%

Part 2: Investment Alternatives

Instruction

You have learned about the various investment vehicles available to increase your savings (mutual funds, GIC’s, RRSP, RESP). Armed with this information you have decided to invest your money for one year in order to increase your funds for the future purchase of a car.

Knowledge

1. Use the compound interest formula to determine the future value of each one-year investment. Assume interest is compounded annually and that each investment has a 2% management fee.

a)$1000 in a fund that averages 6.08% growth per year. [2]

b)$5000 in an investment that averages 18.42% growth per year. [2]

c) $2000 in a mutual fund that averages 2.27% growth per year. [2]

2. Calculate the interest earned for each part of question 1. [6]

3. You have decided to research three mutual funds in order to make an educated decision when investing your funds. Choose three mutual funds and complete the following table. [3]

(Hint) Try using this link to search for various funds: http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/

	Example	Fund 1	Fund 2	Fund 3
Fund Name	RBC Balanced
Fund Symbol	rbf272
Fund Return over:
1 year	-2.85%
3 years	4.30%
5 years	-0.69%

Communication

4. Which mutual fund will you choose? Explain why. [4]

5. Is a GIC a high risk or low-risk investment? Explain [3]

Application

6. Over a one-year period your original investment of $2000 averaged 3.5% growth. After subtracting the annual management fee, what is the value of your investment? [3]

7. Read about GIC’s using this link: http://www.getsmarteraboutmoney.ca/en/managing-your-money/investing/guaranteed-investment-certificates/Pages/gic-basics.aspx

8. You have invested $1000 in a one year GIC that pays 1.25% annual interest compounded annually. Determine the value of the investment after one year. [3]

9. Use either the websites provided or research on your own the following investment alternatives. Complete the table below. [10]

Type of Investment	Advantages	Risks
GIC’s (Guaranteed Investment Certificate)
Mutual Bonds
RESP’s (Registered Education Saving Plans)
RRSP’s (Registered Retirement Savings Plan)
RRIF’s (Registered Retirement Income Fund)

Thinking

10. In your opinion, is each of the following investments low-risk, medium risk, or high risk? Explain your thinking. [14]

Investment	Risk Level ( low-risk, medium risk, or high risk)
opening a savings account
buying units of a mutual fund
buying shares in an technology company
buying a GIC from a bank
buying a hectare of land
investing in a friend’s start up business
buying shares in a bank

11. After examining a few investment options, in your opinion, what will be the best option for you to invest the funds required to purchase your vehicle in one year. Explain. [4]

Part 3 Choosing and Applying a Credit Card

Instruction

Work with your partner to research and gather the information from the following credit cards: one issued by a bank and one offered by a retailer.

Feature Comparison Table (12 marks)

	RBC Rewards Visa Gold	HBC Credit Card
Annual Fee
Annual Interest Rate
How often is the interest compounded?
Grace Period How many days after the monthly statement are issued is the payment due?
How much interest is charged if the balance is paid in full by the due date?
Minimum Payment
Finance Charge for Late Payment
Method of Calculating Finance Charge
Incentives or Rewards
Cash Advances Annual Interest Rate
Credit Limit
Income Requirement

Case Practice 1 (3 marks)

Alan had the brakes on his car repaired for $344. He charged the debt to his credit card on February 10^th, 2012. When he received his statement, he noticed a due date of March 5^th, 2012. He forgot all about the bill until he received the next month’s statement. He paid the bill on April 3^rd, 2012. The bank charges 16.9% annual interest compounded daily. How much interest Alan’s mistake cost him? (Show full calculation steps)

Case Practice 2 (6 marks)

David wants to buy a computer for $650 and pay for it using a credit card that has an annual interest rate of 19% and compounded daily. If David pays the minimum payment of $21.45

1. How long will take him to pay off the computer?

2. What’s the total amount at the end David will pay for this computer?

3. What’s the total interest he paid of using this credit?

Please answer the above questions and show all calculation steps.

Skills Chart

Knowledge and Understanding	Thinking and Inquiry	Communication	Application
30%	15%	20%	35%

Culminating Task #4: Drive in the "Right" Lane [50 marks total]

1. What are advantages and disadvantages of leasing or buying a new/used car? [12]

Obtaining a Vehicle	Advantages	Disadvantages
New vehicle
Used vehicle
Leasing a vehicle

2. List “Needs” to consider before selecting a car. [4]

· __________________________________________________________________________________________________________________________________________

3. Based on pros and cons of buying or leasing a car, you’ve decided to consider the following information to choose from. Fill in the blanks by using appropriate calculations through a TVM Solver for both PLAN A and PLAN B. [40]

		PLAN A: Car Choice 1	PLAN B: Car Choice 2
Buying a new vehicle	Make	Honda	Hyundai
	Model	Civic sedan 4	Elantra
	Year	2012	2012
	Price selling for	$17355	$16854
	Total cost with tax:	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________
	In case of financing	$3000 for down payment with financing at 4.8% annual interest, compounded monthly over 4 years	$2500 for down payment with financing at 4.9% annual interest, compounded monthly over 3 years
	Monthly payment:	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ __________________________	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________

Buying a used vehicle		3-year-old Honda Civic purchased from a friend for $13500	2-year-old Hyundai Elantra purchased from your uncle for $14050
Buying a used vehicle	Total cost including tax. (only PST from a private seller)	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________	___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________

Leasing a vehicle		$1500 down and 36 payments of $210	No money down and 48 payments of $177
	Total cost of new car lease	___________________________ ___________________________ ___________________________ ___________________________ ___________________________	___________________________ ___________________________ ___________________________ ___________________________ ___________________________
	Is the buyout price fair? Explain. (Compare with the original price of the vehicle with tax.)	You can buy this vehicle for $6000 at the end of the lease. ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________	You can buy this vehicle for $5000 at the end of the lease. ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________

4. Summarize and explain which car and which way of getting a car is better for you. [4]

_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Knowledge and Understanding	Thinking and Inquiry	Communication	Application
35%	20%	15%	30%

Foundations for College Mathematics, Grade 11 MBF3C UNIT 4: Personal Finance

Culminating Activity PART IV: DRIVING YOUR DREAM CAR

Teacher: __________________________ Name: _______________________

Mark: ___________/50

DRIVING YOUR DREAM CAR

Now that you have bought your dream car the fun is about to begin. But in order to have fun owning the car you have to plan your expenses carefully. So let’s start.

I. Here are some of the expenses that you will have to budget for, now that you are a proud owner of _________________________________________ (make and model). Separate the expenses into fixed and variable, and estimate the amounts that you are likely to incur over the next 12 months. [6]

Lease payment, parking fines, insurance, gasoline, depreciation, loan repayment, licence plate sticker, oil changes, bridge tolls, monthly parking permits.

Cost	Fixed/Variable	The Estimate	Cost	Fixed/Variable	The Estimate

Your Annual Fixed Cost Estimate is FC= $________________

Your Annual Variable Cost Estimate is VC=$________________

Your Total Annual Car Cost Estimate is TC=$________________

Now let’s check how educated your estimate is!

Insurance[15]

a) Make a list of the factors that will affect the amount you will pay to insure your vehicle. [2]

b) Which of the above factors are in your favour for lower insurance costs? [2]

Go to the website http://www.kanetix.ca/ Follow the links to get an insurance quote. Use the information based on the car you selected. Use your own personal information as much as possible. Example: If you don’t have a license, pretend you do! You may pick whatever coverage you would like. Assume you are the only driver on the car.

a) What are some of the major factors they consider when giving an insurance quote? [1]

b) What is your annual quote? $ _____________________[2]

What is your monthly quote? $______________________[2]

c) Calculate the annual insurance cost if you choose the monthly installments. Calculate the difference between the two payment methods. [3]

d) Which payment option would you choose and why? [4]

Now that you have your insurance quote let’s calculate the other expenses.

Fuel cost [11]

a) Research the price of gas per liter today. [1] P=_______________

b) What size gas tank does the car you have chosen have? (you may have to look it up) How much would it cost to fill this tank, based on today’s price? [2]

c) Use the http://oee.nrcan.gc.ca/transportation/tools/fuelratings/ratings-search.cfm website to answer the following questions:

What is the estimated city fuel consumption rating for your vehicle? [1]

What is the estimated highway fuel consumption rating for your vehicle? [1]

Explain what does the fuel efficiency rating mean. [2]

Why do you think you might get better fuel efficiency on the highway? [1]

How much fuel would your car use on a 400km trip? (assume the whole way was highway

driving) [2]

How much would the gasoline cost be based on today’s price of gas? [1]

Depreciation [13]

Depreciation is the major disadvantage to buying a new car. A car depreciates in value the most during its first year. Here is a chart that shows the typical depreciation rate of a car.

Time	Depreciation (% of previous year’s value)
1st year	30%
2nd year	15%
3rd year	15%
4th year	10%
5th year	8%

a) Use this chart to figure out how much your car would be worth after each of the first five years. [3]

b) Calculate the average rate of depreciation for the first three years. [2]

c) Using the above depreciation table calculates the value of a three year old car whose original price was $43, 000. [2]

Compare your answers to the estimate from the first page.

Cost	The Estimate	The Actual Cost	The Difference
Insurance
Fuel Cost
Depreciation

What is the difference in

a) your annual fixed cost $_____________________[2]

a) your annual variable cost $_____________________ [2]

a) your total annual cost $_____________________ [2]

Bonus Question [5]

Are there, in your opinion, any other costs associated with owning a vehicle besides the ones we mentioned here? Tell me more!

	Knowledge and Understanding	Inquiry / Thinking.	Communication	Application	Total
Out of	/10	/15	/10	/15	/50

Culminating Task Rubric: Personal Finance Portfolio

Category	Level 1	Level 2	Level 3	Level 4
Knowledge and Understanding · Demonstrates an understanding of the advantages and disadvantages of using credit cards. · Demonstrates an understanding of the advantages and disadvantages of owning versus leasing a vehicle.	Demonstrates limited understanding of the advantages and disadvantages of using credit cards and of the advantages and disadvantages of owning versus leasing a vehicle.	Demonstrates some understanding of the advantages and disadvantages of using credit cards and of the advantages and disadvantages of owning versus leasing a vehicle.	Demonstrates considerable understanding of the advantages and disadvantages of using credit cards and of the advantages and disadvantages of owning versus leasing a vehicle.	Demonstrates thorough understanding of the advantages and disadvantages of using credit cards and of the advantages and disadvantages of owning versus leasing a vehicle.
Thinking · Prepares a plan to solve the problem. · Carries out the plan.	Needs extensive assistance to begin organizing a plan and needs clearly laid out steps to follow.	Needs some assistance to begin organizing a plan and needs some steps to follow.	Needs minimal assistance to organize and implement an effective strategy.	Needs no assistance to organize and implement an effective strategy.
Communication · Clear and organised presentation of information. · Clear and convincing justification of choices. · Correct use of financial language.	Does not clearly present information or justify choices. Uses financial terminology incorrectly.	Presents information in a somewhat clear and organised manner. Provides some justification of choices. Sometimes uses financial terminology incorrectly.	Clear and organised presentation of information. Justifies choices fully. Correctly uses financial terminology.	Very clear, organised, and thorough presentation of information. Fully and convincingly justifies choices. Correctly uses financial terminology fluently.
Application · Calculates the cost of owning or leasing a vehicle. · Calculates the doubling time for the investment choices.	With considerable difficulty, calculates the cost of owning or leasing a vehicle and the doubling time for the investments. Makes major errors.	With minor difficulty, calculates the cost of owning or leasing a vehicle and the doubling time for the investments. Makes some errors.	Calculates the cost of owning or leasing a vehicle and the doubling time for the investments. Makes very few errors.	Calculates the cost of owning or leasing a vehicle and the doubling time for the investments with a high degree of effectiveness. Makes very few or no errors.

Loan shaRKS

Culminating Task

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