Nuffield - Annual Percentage Rate (APR)

This introduces APR, the interest charge that is involved when we borrow money, and how to calculate it for both a whole number and a fractional number of year length terms. It also suggests reasons why people want to borrow money.

+
Mathematical strand

Financial Maths, Algebra and Graphs

+
Prior knowledge

Previous knowledge of calculating percentages and calculations involving roots (using the indices button and its inverse on a calculator) would be useful.

+
Relevance to Core Maths qualifications

  • AQA
  • Eduqas
  • Pearson/ Edexcel
  • OCR

+
Suggested approaches

The task could be used with an investigative approach, where students are given loan amounts, total amount repaid, APR and length of loan – in order to come up with a formula to connect them. Students can then use the formula to calculate the APR in different situations within the worksheet.

+
Resources/documentation

In addition to this overview, there are:
• Detailed teacher notes (Word and PDF)
• Student worksheet (Word and PDF)
• PowerPoint presentation

+
Relevant digital technologies

Access to a calculator or to a spreadsheet is needed. Internet access might also be useful.

+
Possible extensions

Students could look at examples where more than one payment is made (as is normal with most loans and mortgages) and how this can complicate the calculation.

+
Acknowledgement

This is a resource developed by the Nuffield Foundation for the FSMQs and can be accessed at www.nuffieldfoundation.org/fsmqs/level-3-personal-finance