Module 13

Financial Algebra

This module provides a solid foundation in mathematical concepts and skills necessary for understanding and making financial decisions.

Topics covered in this module include interest rates, loans, compound growth, stocks and bonds, and net present value. We explore linear and exponential functions and work through case studies that apply mathematical concepts to practical life scenarios.

Module At A Glance

Grade Levels:

6th - 10th

Est. Length:

2-5 Hours (20 slides)

Activities:

2 Activities

Articles:

0 Articles

Languages:

English & Spanish

Curriculum Fit:

Math, Business, Economics, CTE, Social Studies

Standards Alignment:

CEE National Standards, Jump$tart National Standards & Relevant State Standards

Guiding Questions

How do interest rates affect the cost of loans and investments?
How can we calculate the interest paid or earned on a financial product?
How can we calculate the net present value of different financial decisions, and how can we use this information to make informed choices?
How can we use algebraic equations and functions to model and solve financial problems in the real world?
How can we apply the principles of financial algebra to real-world scenarios?

Enduring Understandings

Fractions and percentages are interchangeable, but incredibly useful when working with financial decisions.
Your income is subject to state and federal taxes, and these taxes can be calculated by multiplying your income with percentage tax rates.
Interest rates also play a crucial role in the cost of loans and investments.
Financial algebra can be applied to real-world scenarios, such as buying a house, starting a business, or planning for retirement.

Module Vocab & Key Topics

Chart Axes: Axes are the lines that create a grid for graphing functions or data. The horizontal axis is called the x-axis, the vertical axis is called the y-axis, and they intersect at a point called the origin.
Linear Equation: A linear equation is an equation of a straight line in the form y = mx + b, where m is the slope of the line and b is the y-intercept (the point where the line crosses the y-axis). Linear equations can be graphed on a coordinate plane.
Amortization: The process of paying off a debt over time, with regular payments that include both principal and interest.
Time Value of Money: The concept that money today is worth more than the same amount of money in the future, due to the potential for investment returns.
Present Value: The current value of a future sum of money, calculated by discounting it to its present value.
Future Value: The value of an investment at a future point in time, calculated by compounding the original principal and any interest earned.
Net Present Value: The difference between the present value of all future cash inflows and the present value of all future cash outflows, used to evaluate the profitability of an investment.
Internal Rate of Return (IRR): The interest rate at which the net present value of an investment equals zero, used to evaluate the potential return on an investment.
Interest: The cost of borrowing money, usually expressed as a percentage of the amount borrowed.
Simple Interest: Interest that is calculated only on the principal amount.
Compound Interest: Interest that is calculated on both the principal and any accumulated interest.

Worked Examples

Financial Algebra In Action

Four money decisions, solved with the same equations students meet in this module — interest, loan payments, amortization, and present value.

Figures current · August 2026

Linear vs exponential

Simple Interest Is A Line. Compound Isn't.

500 + 25t vs 500(1.05)ᵗsame 5%

$500 at 5%. Simple interest adds the same $25 every year, which draws a straight line. Compound interest raises 1.05 to the power of t, and the line becomes a curve.

$1,326.65compound, after 20 yearssimple: $1,000

Same rate, different function — the gap between a line and a curve is the whole argument for starting early.

The payment formula

What A Used Car Actually Costs

M = P · r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)r = monthly rate

The average used-car loan carried an 11.43% APR in early 2026. Borrow $25,000 at 11.4% for five years and the formula fixes the payment — you do not get to negotiate it.

$549a month for 60 months$7,914 of interest

Stretching the same loan to 72 months drops the payment to $481 and raises the interest to $9,632 — the term is in the exponent on both sides of the fraction.

Amortization

The Same Payment, Split Differently

interest = balance × revery month

Every payment on that car loan is $549. What changes is where it goes: interest is charged on whatever balance is left, so it shrinks as the balance does.

$311of principal in payment 1$543 in payment 60

Early payments mostly rent the money; late payments mostly buy the car.

Present value

What Is $1,000 In Ten Years Worth Now?

PV = FV ÷ (1 + r)ⁿdiscounting

Money later is worth less than money now, because money now can be invested. Discount $1,000 arriving in ten years at 5% and you get what that promise is worth today.

$613.91today$1,000 in 10 years

This is the algebra behind every lump-sum-or-payments choice — and behind why a lottery's advertised jackpot is not what it pays.

Source: Experian State of the Automotive Finance Market, Q1 2026 (average used-car APR). All other figures derived from the inputs shown. Reviewed August 2026.