Villas, Cars, and Interest Rates

The past several classes with Alec, Lukas, and Max, we've been talking about interest rates and about how much things really cost. If you want to buy a car, or a house, and you were to take out a loan, how much would you end up having to pay back? Of course, this has been drastically oversimplified so none of us get headaches.

Last week they were enjoying being "Unfair Banks" where they charged 99% interest on loans. Not realistic, but funny.

Since they were enjoying talking about large amounts of money last week, today we got really expensive. We pulled out the computers and by searching for "big fancy mansion," Lukas found a website selling French Villas. Things are expensive in the south of France - the one they wanted to buy cost 27,500,000 Euros. Yes, you read that correctly.

We pulled out the currency converter and found that this comes to roughly $37 million in US currency. We searched for current interest rates on house loans and found one that was 4.75% interest. Dividing by 365, the daily interest rate would be roughly .013%.

If you took out a $37 million loan to buy this house, ONE DAY of interest would cost you approximately

(.00013)(37,000,000)=$4810.

That's enough to buy a car. Probably a used car, but still a car.