Student Learning Objectives - Missouri FFA



EP6Agriculture Management, Economics, & SalesTime Value of MoneyUnit: Economic Principles in AgribusinessLesson Title: Time Value of Money Standards ABS.01.01.01.a. Recognize principles of capitalism as related to AFNR businesses.ABS.04.01.03.a. Explain the importance of return on investment for an agribusiness enterprise.ABS.04.01.02.a. Identify financial concepts associated with production and profit.CS.02.04.01.c. Demonstrate critical and creative thinking skills while completing a task.CS.03.01.01.a. Use basic technical and business writing skills.CS.09.01.01.a. Calculate the effect of compound interest on AFNR investments.Missouri Personal Finance MM.5. Summarize how inflation affects spending and savings decisions.Missouri Personal Finance SI.3. Examine reasons for saving and investing.Missouri Personal Finance SI.6. Analyze factors affecting the rate of return on investments (Rule of 72, simple interest, compound interest).CCSS.Math.Content.HSN-Q.A.1?Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data SS.Math.Content.HSA-SSE.A.1?Interpret expressions that represent a quantity in terms of its SS.Math.Content.HSA-SSE.B.4?Derive the formula for the sum of a finite geometric series (when the common ratio is not 1), and use the formula to solve problems.?CCSS.ELA-Literacy.SL.11-12.3?Evaluate a speaker’s point of view, reasoning, and use of evidence and rhetoric, assessing the stance, premises, links among ideas, word choice, points of emphasis, and tone SS.ELA-Literacy.W.11-12.2?Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selection, organization, and analysis of content.Student Learning ObjectivesSlide 2 in EP6 Time Value of Money Lesson ObjectiveAfter completing the lesson on time value of money, students will demonstrate their ability to apply the concept in real-world situations by obtaining a minimum score of 80% on a Time Value of Money Blog.Enabling ObjectivesAs a result of this lesson, the student will…Define time value of money.Define and calculate the future value of a dollar.Define and calculate the future value of a dollar per period.Define and calculate sinking fund factors.Define and calculate the present value of a dollar.Define and calculate the present value of a dollar per period.Define and calculate amortization.Correlate the connection between time value of money and inflationTime: Approximately 200 minutesList of ResourcesBacon K., Boren N., Kirkwood V., Birkenholz R., Plain R., Rohrbach N. (1988). Agriculture Management and Economics Instructor Guide. Columbia, MO: Instructional Materials Laboratory.Bacon K., Boren N., Kirkwood V., Birkenholz R., Plain R., Rohrbach N. (1988). Agriculture Management and Economics Student Reference Guide. Columbia, MO: Instructional Materials Laboratory.Hondros Learning. (2006). Statistics, modeling & finance. Westerville, OH: Retrieved from: .Sterling, M.J. (2008). Business Math for Dummies. Hoboken, NJ: Wiley Publishing, Inc.Sepand jazzi. (2012). Time Value of Money. Retrieved from , K. (2012). Time Value of Money, Inflation, and Opportunity Costs. Retrieved from , E. (n.d.). The Wealth Accumulator. Retrieved from . (n.d.). High Yield Savings Accounts. Retrieved from of Tools, Equipment, and SuppliesEP6 PowerPoint PresentationEP6 Activity Sheet and Evaluation PacketNote card or small sheet of paper for review activityNote to teachers for problem solving – using scientific calculatorsTime Value Tools Excel DocumentKey TermsSlide 3 in EP6 Time Value of MoneyThe following terms are presented in this lesson (shown in bold italics):Time value of moneyPresent valueFuture valueInterest CompoundingDiscounting Ordinary AnnuityAnnuity DueInterest Approach: Use an interest approach that will prepare the students for the lesson. Teachers often develop approaches for their unique class and student situations. A possible approach is included here.Slide 4 in EP6 Time Value of MoneyWhat is this thing – Time Value of Money? Ask students upon first impression of seeing “Time Value of Money” what they think it means, entails, describes, etc. Then pose a question to students, “If you won 1 million dollars in the lottery and had two choices – to take the money today or wait a year to take the money – which would you choose?Facilitate a discussion on students’ thoughts and ideas, asking “why” questions. Then show this video: 516034147498000Summary of Content and Teaching Strategies47685468890005514975-190500Objective 1: Define time value of money. Teaching StrategiesRelated ContentBased upon our discussion and the video we just watched, let’s define time value of money.Slide 5 in EP6 Time Value of MoneyIntroduce six functions of the dollar.Slide 6 in EP6 Time Value of MoneyWhat is time value of money?The idea that a dollar today is worth more than a dollar a year from nowNo matter how much money is invested, there is an opportunity cost involved – biggest opportunity cost is interest – the cost of borrowing money or the income earned by investing moneySix functions of the dollarFuture value of a $1Future value of a $1 per periodSinking fund factorPresent value of a $1Present value of a $1 per periodAmortizationPresent valueWhat something is worth today$50 savings bond that matures 12 years in the future may be purchased today for $25 – a lower price for the bond is paid because it will be earning interest, which is added to its initial cost to raise its value to $50 at maturity557212576200048101256350005216553817200Objective 2: Define and calculate the future value of a dollar. Teaching StrategiesRelated ContentFacilitate a discussion on how students would define the future value of a dollar.Slide 7 in EP6 Time Value of MoneySlide 8 in EP6 Time Value of MoneyPractice calculating future value of a dollar on EP6.1.Slide 9 in EP6 Time Value of MoneyPractice calculating future value of a dollar on EP6.1.Future value of a dollarWhat the value of $1 invested today will be if the money is allowed to grow over a period of timeAll monies earned (interest) must be reinvestedCompounding – Process of calculating future value; Interest earned during one period is added to principal in order to calculate interest for the next periodFV=PV x ( 1+i)ntCalculating future value of the dollarAn investor deposits $100 into a bank savings account – initial investment or present value (PV); bank pays 5% annual interest – interest rate (i) – after one year, the investment will have a future value (FV) of $105 ($100 x $1.05 = $105); the compounding period (n) is one because it is annual and the time (t) is two years – investment’s future value is $110.25 ($105 x $1.05 = $110.25)Rule of 72Used to determine how long it takes for money to double at any given interest rate72/compounding rate = number of years it takes for the sum of money to double$10,000 invested at 6% interest – 72/6 = 12 – takes 12 years to double to $20,000487252012424005235685158750055721251587500Objective 3: Define and calculate the future value of a dollar per period. Teaching StrategiesRelated ContentThe second function of the dollar is future value of a dollar per period.Slide 10 in EP6 Time Value of MoneySlide 11 in EP6 Time Value of MoneyPractice calculating future value of an annuity on EP6.1.Future value of a dollar per periodWhat the value of $1 invested on a periodic basis (weekly, monthly, yearly, etc.) will grow to if investment is allowed to grow over time All interest must be reinvested or compoundedAlso known as an annuity – Annuity Due – Payment or deposits made at beginning of period; Ordinary Annuity – Payments made at end of each periodSimilar to future value of the dollar except – rather than placing a single payment into an account at the beginning of the term, payments are deposited on a regular basis at the end of each turn; ordinary annuityLease payments received on an asset with the cash flow residual deposited at end of each yearCalculating future value of an annuityAfter paying all expenses on a facility, an investor will have $100 at the end of each year to deposit into a savings account – represents periodic payment (PMT)Bank pays 5% interest – interest rate (i)After the first year, the investment will have a value of $100 since the money was deposited in the account at the end of the first yearAt the end of year two, the total amount grows to $205 – the first $100 deposit has now earned $5 plus the additional $100 deposited at the end of the second yearAmount will grow at 5% for the next year and equal $215.25 at the end of that time – at which another $100 is deposited – brings total to $315.25 for the three years483276431115005226160160680055721251905000Objective 4: Define and calculate sinking fund factors. Teaching StrategiesRelated ContentThe third function of a dollar is sinking fund factorsSlide 12 in EP6 Time Value of MoneyPractice calculating sinking fund factors on EP6.1.Slide 13 in EP6 Time Value of MoneySinking Fund FactorsShow amount of regular payments that must be invested over a period of time At a specified interest rateWith reinvestment of all monies earnedSo a desired or target amount is accumulated at the end of the investment termCalculating sinking fund factorsJoyce would like to buy a car following her college graduation after 4 more years of school. She estimates the car will cost $10,000 when she graduates. If her savings account pays a 5% annual rate of interest, compounded monthly, how much does she need to deposit monthly to have $10,000 when she graduates in 4 years? FV = $ 10,000 Future Value 4 yearsi = 5%, or .05 interestn = 12 (monthly)t = 4 years Pmt = $ ? Monthly deposit required52581311765300048726865080005610225-254000Objective 5: Define and calculate the present value of a dollar.Teaching StrategiesRelated ContentFacilitate a discussion on students’ ideas on the definition of the present value of a dollar.Slide 14 in EP6 Time Value of MoneyPractice calculating the present value of a dollar on EP6.1.Slide 15 in EP6 Time Value of MoneyPresent value of a dollarHow much must be invested today for the investment to grow to $1 at the end of a specified time period All monies earned must be reinvested Value of something in the future is known; what it is worth today must be determinedDiscounting – process of calculating present value of something that will be received in the future; opposite of compoundingPV= FV x 1(1+i)ntCalculating present value of a dollarA promissory note for $1000 is due in two years. A typical return on deposits is currently 4% annuallyPV = 1000 x 1(1+.04)1*2$924.5647939461778000519336195250055530751079500Objective 6: Define and calculate the present value of a dollar per period. Teaching StrategiesRelated ContentThe next function of the dollar is the present value of a dollar per period. This is also known as present value of an annuity.Slide 16 in EP6 Time Value of MoneyPractice calculating the present value of an annuity on EP6.1.Slide 17 in EP6 Time Value of MoneyPresent value of a dollar per periodHow much money, in a single payment, must be invested today and compounded into the future to equal a series of periodic payments in the futureThe value of a stream of payments to be received each year for several yearsAlso known as an annuityCalculating present value of an annuity PV = PMT1 + innt-11 + innt* in Jill’s parents will receive $10,000 per year in annual installments from an annuity for the next 20 years. If the fund provides a minimum annual return of 7% on the investments, what is the present value of the annuity based on the minimum return? Solve for Present Value:PMT = $ 10,000 per periodi = 7%, or .07 interestn = 1 (annual)t = 20 years PV = ? Present Value.52566411689100056325881692420048549061270000Objective 7: Define and calculate amortization. Teaching StrategiesRelated ContentThe final function of a dollar is amortization. Does anyone know what amortization is?Slide 18 in EP6 Time Value of MoneyPractice calculating amortization on EP6.1.Slide 19 in EP6 Time Value of MoneyAmortizationA decrease in a loan balance through equal periodic payments Principal and interest paid with each paymentWith equal payments, there is a larger amount of interest cost and smaller amount being applied to principal during the early stages of the loan – as number of payments increase, amount of interest decreases, and amount going towards principal increasesInterest is only paid on actual amount still owed Based on fixed-rate, term loansDoes not apply for variable-rate term or variable term loansCalculating amortizationPMT = PV in 1- 1 + in- ntJennifer plans to buy her first car and will need to borrow $5000. If she can get a 5 year, equal amortized monthly payment loan with a 6% fixed interest rate, what will her monthly payments be? P = $ 5,000 loan (Principal)i = 6%, or .06 (interest) n = 12 (monthly)t = 5 years PMT = $ ? Monthly payment4849909176833005254736177165005610225190500Objective 8: Correlate the connection between time value of money and inflation. Teaching StrategiesRelated ContentRecall the definition of time value of money – money today is worth more than money tomorrow.Give students sample scenarios that involve them deciding if they will take a certain amount of money today or more money one, two, or three years from now. During discussion bring in factors like investment returns, interest rates, etc.Have students identify how they would label the option they did not choose (recall from EP4) – opportunity costs.Inflation must also be considered when talking about time value of money. Let’s see how these relate:Have students read two of the following articles:(More articles may be available for students at CNN Money, Yahoo Money, MSN Money, etc.)While reading, students should note 10 bits of advice they pulled from the articles. Using this advice, create an 8 ? x11” poster representing the relationship between time value of money and inflation.Present these to the class when finished and hang final products on a bulletin board to make a collage of time value of money/inflation information.Review/SummarySlide 20 in EP6 Time Value of MoneyThe time value of money is affected by time. Investments involving short time periods (less than one year) can be compared without using the concept of time value of money. Comparison between two investments should use present values. An investment must be feasible as well as profitable.561022519875500Review: 4904049314190052626873302000Practice math calculations using EP6.3, EP6.4, EP6.5, EP6.6, EP6.7, and EP6.8. Complete some as a class, some with partners, and some individually. EP6.2 is a cheat sheet for teachers/students with six functions of the dollar formulas. Exit cards: Students will answer the following questions on a note card or small slip of paper and hand to teacher as they exit:What did you learn today about time value of money?What questions do you still have about time value of money or calculating the six functions of a dollar? ApplicationExtended ActivitiesUse the FarmDoc Fast Tools time value of money calculator to calculate the time value of money of the sample problems used throughout the lesson. In addition, explore the various other time value of money calculators available online.Invite a local businessperson from an investment firm to talk to the class about investments and his/her relationship to time value of money. He/she could also preview retirement planning, risk management, etc. This could serve as a preview to topics covered in the agribusiness planning and analysis and agribusiness management units.Examine student record books and have them identify areas where money is currently invested, but could be invested in other places. Have each student consider if he/she has money in a savings account, how much interest it is making, if it would be more profitable in the long run to invest the money into their Supervised Agricultural Experience Program or another investment entity. Share conclusions and thoughts with the teacher during the next SAE visit.553402526352500Evaluation51444666731000Time Value of Money Blog Evaluation EP6.9Alternate - Paper-pencil Quiz Evaluation EP6.10Answers to EvaluationEvaluation EP6.9Answers will vary. Use scoring guide on EP6.9 to assess student work. Alternate Evaluation EP6.10See EP6.10 KEY. ................
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