****Course 2A, Course 3, and Algebra students ONLY****

Below are the instructions for the Consumer Credit Project.

I. Simulation: (8 weeks) 80 points--each weeks records sheets are worth 10 points

1. You will be assigned a scenario with a monthly income and fixed expenses which

must be paid by every second Friday. (Every two weeks will be considered one

month in this project, and the project will last for a total of 8 weeks).

2. a) Besides your fixed bills that must be paid every two weeks, you must make

mandatory purchases every week according to your given scenario.

b) You must choose an item to purchase from the “optional” list each week.

The list of optional purchases, as well as the extra mandatory expenses will be provided

by your teacher. Of these weekly purchases, at least one must be paid with credit.

3. a) Your credit card bill will be due by the same Fridays as your other expenses.

b) You will be required to calculate your interest charges for purchases made during

each two week period. Interest charged will be based on an annual 18% interest

rate. Your minimum payment will be 2% of your outstanding balance.

These calculations, along with a record of your purchases per week must be kept on your

Credit Tally Sheet. DO NOT LOSE THIS SHEET! Your teacher will have a classroom

binder to keep the tally sheets in. Remember to fill out the tally sheet every week to keep

your balance up to date.

II. Apply for a Loan: (after simulation period) 10 points

1. At the end of the 8-week simulation, you will be required to apply for a loan for a

purchase of your choice. You must determine the purchase price and the amount you

will need to borrow.

2. Calculate the amount of your monthly payments and the total cost of the loan.

Assume the loan is paid over five years at 10% interest rate.

3. Calculate your total debt service ratio to determine if you qualify for this loan. The

formulas you need will be provided.

4. All calculations and explanations of whether you qualified for the loan or not must be included.

III. Written Project and Presentation: 10 points total

1. After you have determined whether or not you qualify for a loan, you will be grouped

according to the scenarios you were given.

2. Discuss in your group your different purchasing choices and your resulting credit

rating.

3. You will be required to write a final report explaining the importance of

making good credit decisions. You will be given questions to answer that will help

you with this report.

4. You will present your results to the class.