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FEDERAL RESERVE BANKS OF ST. LOUIS AND PHILADELPHIA

ECONOMIC EDUCATION

Worth!
By A. LaFaye / ISBN: 978-0-439-91342-3

Lesson Authors
Kris Bertelsen, Federal Reserve Bank of St. Louis—Little Rock Branch
Tamme Adams, Benton Junior High School, Benton, AR

Standards and Benchmarks (see page 19)
Lesson Description
Students participate in a banking role play in which they portray roles based on characters in the book Worth! by A. LaFaye. The students learn about banking, profit, risk,
and reward. Students discuss some of the factors that affect loan interest rates and
the availability of credit. Students apply their knowledge of the content by writing a
fictional applicant a letter of acceptance or rejection.

Grade Level
7-12

Concepts
Banks
Collateral
Interest
Principal
Profit
Reward
Risk

Objectives
Students will be able to
•

define the terms risk, reward, collateral, principal, interest, profit, and bank;

•

explain that risk is the chance of loss and that rewards are positive incentives that
make people better off; and

•

explain why greater risk results in higher potential for reward or loss.

© 2013, Federal Reserve Banks of St. Louis and Philadelphia. Permission is granted to reprint or photocopy this lesson in its entirety
for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education_resources.

Lesson Plan

Worth!

Time Required
Two class periods (not including the reading of the book)

Materials
•

Visuals 1 and 2

•

Handout 1, cut into cards and laminated (if desired) for future use

•

Handout 2, one copy for each student not assigned a part in the role play

•

Handout 3, one copy for each student

•

Dice or interactive dice roller

•

A small reward for the successful loan officers in the role play (optional)

Role-Play Preparation (For Day Two)
For the role play, students will play either (i) loan applicants or (ii) loan officers at one
of two banks. Set up the room so the loan applicants (who may be individual students
or small groups of students) can speak to both banks at the same time and the rest of
the class is able to see and hear.

Procedures
1.

Introduce the book Worth! by explaining that it is a story about a family who lost their
farm in Illinois and moved to Nebraska to start over. Read the following summary from
the author’s webpage and then read the story to the class or assign reading the book
as homework.
In 1870s small-town Nebraska, nothing is easy for young Nathaniel Peale. His
leg is crushed in a farming accident, so he can no longer help his father on the
farm. Afraid he’ll lose their homestead, Mr. Peale adopts a young boy named
John Worth through the Orphan Train system. Nathaniel feels replaced by this
young boy and frustrated because he lost the closeness he had with his father.
He also struggles to keep up with kids half his age when he attends school for
the first time. John Worth doesn’t have it any easier. His family died in a fire in
New York City and now he’s on a farm in Nebraska with no idea what to do. The
boys struggle to find their place in their new family situations. Their struggle
comes to a head when talk of a range war starts and they spot the person who’s
out to heat things up by cutting fences.
SOURCE: http://www.alafaye.com/books/worth.html.

Once the class has read the book, explain that you will use Worth! to discuss risk and
reward, collateral, profit, principal, interest, and banks.

Lesson Plan
3.

Worth!

Ask the students the following questions about borrowing and lending:
•

In what circumstances would you lend money to a friend or family member?
(Answers will vary.)

•

What factors would you consider before making the loan? (Answers will vary but
may include the length of the loan or the reliability of the borrower to repay the
loan.)

•

Why would you lend the money? (Answers will vary but may include feeling sorry
for the borrower, feeling they themselves may need a loan someday, or being
confident the borrower will pay the money back.)

•

What would you do if the borrower was not able or refused to pay you back?
(Answers will vary, but the lender may go to the borrowers’ friends or family for
help in getting the money back, refuse to lend them money in the future, or ask
for something of value in return for the unpaid debt.)

Instruct the students to do the following:
•

Write down three sources of loans. (Answers will vary but might include family,
friends, commercial banks, finance companies, credit unions, or pawn shops.)

•

Write down the first thing you think of when you hear the word “bank.”
(Answers will vary.)

Allow several students to share their responses aloud or have them write their responses
on the board. Discuss students’ answers and their perceptions of a bank. (Answers
will vary, but students may not know how a bank works, the services banks provide,
and so on.)

Ask the students the following question:
•

What do banks do? (Answers will vary, but students may say that banks provide
many services such as checking accounts, savings accounts, or safe-deposit boxes.)

Display Visual 1: Banking Vocabulary and reveal each term as instructed. Reveal “bank”
and define a bank as a business that accepts deposits and make loans.

Read the following sections from Worth! and ask the students the questions that follow:
Page 25: Locusts ate up all we had, left us with nothing to live on for the winter or pay the bank with, so Pa had to give them our farm and we had to move
up to Chicago. Just until we had enough to buy back our land, Pa said. We
came to Nebraska instead.
•

Why did the Peales lose their land and move to Nebraska? (The bank kept their
land because they were not able to make the payments on their loan. Because
their crop was destroyed, the Peales had no income.)

Lesson Plan

Worth!

Page 58: “Oh, then who lost that farm? Who borrowed money he couldn’t pay
back? Who dragged us to Chicago?”
•

Who does Mr. Peale blame for the loss of the farm? (Mr. Peale accepts the blame.
He referred to himself when he said, “Who borrowed money he couldn’t pay
back?”)

Pages 76-77: I knew Pa spoke of the man who’d cut through that fence. I felt
pretty much the same way, not only about that man who had cut into what
little we had to live through the winter and pay back the bank, but also about
Worth, who’d pretty much trampled my life down like so much corn.

•

When Nathanial said, “live through the winter and pay back the bank,” what is
the connection between paying back the bank, the ruined crops, and winter?
(Answers may vary, but it is common for farmers to borrow money for seed in
the spring and pay the bank at harvest time in the fall after they have sold their
crops. Since the Peale’s crops were damaged, they would have less to sell and a
difficult time making payments.)

•

What are some reasons a farmer might need a loan? (Answers will vary but
might include to buy more land, equipment, or livestock or seed, fertilizer, or
other supplies.)

Reveal “Risk” and “Reward” on Visual 1. Define risk as the chance of loss. Generally,
the higher the risk, the higher the potential for loss. Define reward as a positive incentive that makes people better off.

10. Explain that the passages from Worth! demonstrate the concepts of risk and reward.
Lenders, such as banks, face the uncertainty that a borrower will not be able to pay
back a loan. The bank risks not earning a profit and could sustain losses.
11. Reveal “Risk-reward relationship” on Visual 1. Define the term as the idea that there
is a direct relationship between the risk of the loss of principal and the expected rate
of return. The higher the risk of loss of principal for an investment, the greater the
potential reward. Conversely, the lower the risk of loss of principal for an investment,
the lower the potential reward.
12. Tell students you are going to read a few proposals with a risk-reward relationship.
After each, they should raise a hand if they would take the risk.
•

Would you bet $100 on a coin toss if the deal were that you could keep your
$100 and receive an additional $5.00 for heads but lose the $100 for tails?

•

Would you bet $100 on a coin toss if the deal were that you could keep your
$100 and receive an additional $100 for heads but lose the $100 for tails?

Lesson Plan
•

Worth!

Would you bet $100 on a coin toss if the deal were that you could keep your
$100 and receive an additional $400 for heads but lose the $100 for tails?

13. Explain that in the coin-toss proposals, the potential reward increased. In order to
entice people to take the risk of losing their $100, the reward has to be great. Each
person, and bank, has a certain level of risk tolerance, or aversion to risk.
14. Explain that sometimes lenders try to reduce their risk by requiring a borrower to provide collateral when a loan is made.
15. Reveal “Collateral” on Visual 1. Define collateral as property required by a lender and
offered by a borrower as a guarantee of payment on a loan. Also, a borrower’s savings,
investments, or the value of the asset purchased that can be seized if the borrower
fails to repay a debt.
16. Ask the students the following question:
•

What collateral did the Peales use to secure the loan for the farm in Illinois? (The
farm was the collateral, which was the reason they lost it.)

17. Explain that businesses often need loans to pay for expansions, purchase merchandise,
make payroll payments in a timely manner, or for other reasons. Ask the students the
following questions:
•

Where are small businesses most likely to borrow money? (Answers will vary, but
commercial banks are the most likely source of funds.)

•

Why do banks lend to businesses and others? (Answer may vary, but the motivating factor is to earn profits.)

18. Explain that banks make loans to earn a profit. Principal is the original amount of a
loan. To cover their expenses and make a profit, banks charge interest on loans.
19. Reveal “Profit” on Visual 1. Define profit as the amount of revenue that remains after
a business pays the costs of producing a good or service.
20. Reveal “Principal” on Visual 1. Define principal as the original amount of money
deposited or invested, excluding any interest or dividends. It is also the original amount
of a loan without any interest.
21. Reveal “Interest” on Visual 1. Define interest as the price of using someone else’s
money. When people place their money in a bank, the bank uses the money to make
loans to others. In return, the bank pays interest to the account holder. Those who borrow from banks or other organizations pay interest for the use of the money borrowed.

Lesson Plan

Worth!

22. Explain that the interest rate borrowers pay for a loan and the rate savers receive for a
savings account are determined by the amount of risk.
23. Explain that parties involved in a loan agreement, or contract, must assess their own
levels of risk. For example, a bank may decide a certain applicant is a good or bad risk
based on the borrower’s income, payment history, and so on. On the other hand, borrowers may decide the terms of a loan, such as the interest rate or payment amount,
are not desirable. For example, borrowers might not enter a loan contract if they are
afraid they will default—that is, not be able to repay the loan.
24. Ask the students to recall some of the businesses noted in Worth! (Answers include
farms, ranches, banks, tinkering [fixing things], mercantile [general store], and cobbler
[shoe repair].) Note: If students mention the school, explain that schools are funded
primarily by taxpayers and are generally not considered businesses. Note that in the
next class period students will perform a role play featuring these characters and their
attempts to get loans for their businesses.

Day Two
25. Tell students they will participate in a role play. Read the following introduction:
By the mid- to late 1800s, settlers were moving west in vast numbers. Although
the reasons for moving varied widely, a great number of Americans were drawn
to the possibility of owning and farming their own land. Through various programs and incentives, the U.S. government encouraged this westward expansion.
As people moved, towns and cities began to dot the prairies of the American
West.
In this role play, you will play the roles of farmers, a rancher, business owners,
and loan officers at banks in a small town like the town depicted in the story
Worth! The roles are divided into two categories: loan applicants and loan officers. Loan applicants will appear before the loan officers and request a loan for
their business. Loan officers work at one of two banks and will decide whether
to grant the loans or not.
The loan applicants’ goal is to convince the loan officers to give them the loan
amount they need. The loan officers’ goal is to make loans that earn income
for their bank.
26. Assign the roles as follows:
•

Assign approximately two-thirds of the students to present the six loan applications
(depending on the number of students in the class, there may be one student or
several students working as a team assigned to each loan application). Assign
approximately one-third of the students to play loan officers and divide them
between two banks. For example, in a class of 24 students, you could have 14

Lesson Plan

Worth!

students (two students per application) playing loan applicants and 10 students
playing loan officers, with committees of five loan officers at each of two banks.
•

Divide the loan applicants equally (as much as possible) among the six loan applications. Provide each group with a card from Handout 1: Loan Applicant Roles and
Directions. Explain that it is up to individual groups to assign individual roles. The
role possibilities are noted on each card.

•

Divide the loan officers into two banks (groups). Provide each loan officer with a
copy of Handout 2: Loan Officer Directions.

27. Ask a student to read the directions for loan applicants on a Handout 1 card, as follows (Note: The directions are the same on all cards):
1. Read your role description carefully to gain information about your current
financial situation and your reason for seeking a loan.
2. When it is your turn, present your case to both banks at the same time.
Explain your situation, emphasizing how much money you want to borrow and
how the loan will help you. Remember, banks want to lend money to businesses
they think will be able to pay them back. Make sure you impress the bankers,
but you must be honest about your situation.
NOTE: Because Worth! is set in the mid-1800s, the dollar amounts reflect currency values closer to that time period.
28. Ask the students the following question:
•

What is the loan applicants’ goal? (The loan applicants’ goal is to convince the
loan officers to give them the loan amount they need.)

29. Ask a student to read the loan officer directions on Handout 2, as follows:
1. Your bank collects deposits from customers and makes loans hoping to earn
a profit. You will hear from six businesses applying for loans. You must give
loans in increments of $300, $600, or $900 and in the full amounts requested.
You have $1,800 available to lend and may make no more than four loans.
There is another bank in town in competition with you. After you make the
loans and profit and loss are calculated, the bank with the most profit (or least
amount of loss) will stay in business, while the other bank will be forced to close.
2. As you listen to the loan proposals, you may ask relevant questions, such as
“Do you have collateral to back the loan?” “Are you successful?” “How long
have you been in business?” or “Have you had success with loans in the past?”
You may take notes.
3. After you have heard from all six businesses, meet with the loan officers in
your bank to choose up to four loans to grant. Below, check off the businesses
granted loans.
© 2013, Federal Reserve Banks of St. Louis and Philadelphia. Permission is granted to reprint or photocopy this lesson in its entirety
for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education_resources.

Lesson Plan

Worth!

4. Calculate your profit or loss based on the outcomes defined on Visual 2
(to be displayed after the loans are granted).
30. Ask the students the following question:
•

What is the loan officers’ goal? (The loan officers’ goal is to make loans that earn
income for their bank.)

31. Ask students to read their roles and assign parts (if necessary) and review the directions
quietly. Allow a few minutes for them to do so.
32. Situate the class so that the loan applicants can speak to both banks at the same time
and the rest of the class is able to see and hear.
33. Explain that loan applicants will have a maximum of three minutes per application to
make their case for a loan.
34. Conduct the role play by having the students seeking a loan present their cases simultaneously to the two teams of bankers, one business (family) at a time, in front of the
class.
35. Once all loan applications have been presented, remind the banks that they may lend
a total of $1,800 to no more than four applicants. Explain that it is possible in this
simulation for both banks to choose to make the same loans, but in real life a borrower
simply chooses which loan to take. Allow the two banks time to meet privately to
decide which businesses will receive loans.
36. After a few minutes, record on the board the businesses each bank chose to grant
loans.
37. Explain that one piece of information not shared on the role descriptions was the loan
risk level of each business, with “very low” being the lowest risk and “very high” being
the highest. The actual outcome for each business loan will be determined by rolling
a die.
38. Display Visual 2: Profit or Loss? Roll the die for each business, one at a time, and have
students calculate the profit or loss of each loan based on the defined outcome and
record on Visual 2. For each loan, ask students the following questions:
•

Do you believe the risk level assigned to the loan (high, low, and so on) accurately
portrayed the risk of the loan? (Answers will vary).

•

Given the die roll, did the result of your loan turn out close to the level of perceived
risk as indicated by the risk level? (Answers will vary).

Lesson Plan

Worth!

39. Determine which bank will stay in business and which one will have to close based on
the total profit or loss of each bank. If desired, provide a small reward to the loan officers
of the winning bank.
40. Ask students the following questions:
•

How many businesses were able to get loans? (Answers will vary.)

•

Why did some applicants have difficulty obtaining loans? (Answers will vary, but
the applicants with higher risk may have had more difficulty getting a loan or the
bankers may not have felt they had enough information.)

•

Loan officers, why did your bank reject some of the loan applications? (Answers
will vary, but some bankers may have felt the customer would not be able to pay
back the money.)

•

Loan officers, what information did you consider when making lending decisions?
(Answers will vary but may include whether an applicant had savings or collateral
and whether they sounded responsible or desperate.)

•

Based on the rolled outcomes, how many applicants were able to pay back the
money borrowed? (Answers will vary.)

•

Loan applicants, were you honest about your background and situation? (Answers
will vary.)

•

In the simulation, why did the interest rate increase as the risk level increased?
(In order to take on higher risk, the bank would expect a chance of a greater
return.)

41. Explain that the outcomes were based on the roll of the die, but in real-life situations,
banks use many sources of information to try to accurately assess risk. Examples include
the loan applicant’s credit report, work record, amount in savings, and references from
people who know the applicant. Without such information, banks would likely not be
able to assess the risks of various loan applications.

Closure
42. Review the important content of the lesson by asking the following questions:
•

What is risk? (Risk is the chance of loss.)

•

What is a reward? (A reward is a positive incentive that makes people better off.)

•

What is the risk-reward relationship? (The risk-reward relationship is the idea
that there is a direct relationship between the risk of the loss of principal and the
expected rate of return. The higher the risk of loss of principal for an investment,
the greater the potential reward. Conversely, the lower the risk of loss of principal
for an investment, the lower the potential reward.)

Lesson Plan

Worth!

•

What is collateral? (Collateral is property required by a lender and offered by a
borrower as a guarantee of payment on a loan. It is also a borrower’s savings,
investments, or the value of the asset purchased that can be seized if the borrower fails to repay a debt.)

•

What is profit? (Profit is the amount of revenue that remains after a business pays
the costs of producing a good or service.)

•

What is principal? (Principal is the original amount of money deposited or invested,
excluding any interest or dividends. It also refers to the original amount of a loan
without any interest.)

•

What is interest? (Interest is the price of using someone else’s money. When people
place their money in a bank, the bank uses the money to make loans to others.
In return, the bank pays interest to the account holder. Those who borrow from
banks or other organizations pay interest for the use of the money borrowed.)

Assessment
43. Distribute a copy of Handout 3: Assessment to each student. Read the directions to
the students and ask them to use the terms and concepts from the lesson correctly
and to be creative in their responses.

Lesson Plan

Worth!

Visual 1: Banking Vocabulary

Bank — A business that accepts deposits and makes loans.
Risk — The chance of loss. Generally, the higher the risk, the higher the
potential for loss.
Reward — A positive incentive that makes people better off.
Risk-reward relationship — The idea that there is a direct relationship
between the risk of the loss of principal and the expected rate of return.
The higher the risk of loss of principal for an investment, the greater the
potential reward. Conversely, the lower the risk of loss of principal for
an investment, the lower the potential reward.
Collateral — Property required by a lender and offered by a borrower
as a guarantee of payment on a loan. Also, a borrower’s savings, investments, or the value of the asset purchased that can be seized if the borrower fails to repay a debt.
Profit — The amount of revenue that remains after a business pays the
costs of producing a good or service.
Principal — The original amount of money deposited or invested, excluding any interest or dividends. Also refers to the original amount of a loan
without any interest.
Interest — The price of using someone else’s money. When people place
their money in a bank, the bank uses the money to make loans to others.
In return, the bank pays interest to the account holder. Those who borrow from banks or other organizations pay interest for the use of the
money borrowed.

Lesson Plan

Worth!

Visual 2: Profit or Loss?

Bank Outcomes
Borrower

Risk level

Mercantile

Very low

# Rolled

Outcome

Profit or loss

1, 2, 3, 4, or 5 = Loan paid in full,
earn 2% interest
6 = Loan default, lose 1% of principal

Tinkering

Moderately

(Repair) Shop

low

1, 2, 3, or 4 = Loan paid in full,
earn 3% interest
5 or 6 = Loan default, lose 2% of principal

Cobbler

Moderately

1, 2, 3, or 4 = Loan paid in full,

(Shoe repair)

low

earn 3% interest
5 or 6 = Loan default, lose 2% of principal

Peale Farm

Low

1, 2, 3, or 4 = Loan paid in full,
earn 4% interest
5 or 6 = Loan default, lose 4% of principal

Danver Farm

High

1, 2, or 3 = Loan paid in full,
earn 4% interest
4, 5, or 6: Loan default, lose 8% of principal

Gantry Ranch

Moderately

1 or 2 = Loan paid in full, earn 8% interest

high

3, 4, 5, or 6 = Loan default,
lose 10% of principal

Clemson Farm

Very high

1, 2, 3, 4, or 5 = Loan default,
lose 15% of principal
6 = Loan paid in full, earn 15% interest

Rates of Return or Loss
Loan amount

10%

11%

15%

$300

$12

$24

$30

$33

$45

$600

$12

$18

$24

$48

$60

$66

$90

$900

$18

$27

$36

$72

$90

$99

$135

Lesson Plan

Worth!

Handout 1: Loan Applicant Roles and Directions (page 1 of 4)

Business: Tinkering (Repair) Shop
Applicant(s): Mr. and Mrs. Collins and family, or any combination thereof
Mr. Collins is an experienced tinkerer. He has worked from home for several years. He
has saved 10 percent of what he needs to open a repair shop in town. The requested
loan amount is $600 for a new building. His objective is to get the loan and pay the
balance, in full, on time.

Directions
1. Read your role description carefully to gain information about your current financial
situation and your reason for seeking a loan.
2. When it is your turn, present your case to both banks at the same time. Explain your situation, emphasizing how much money you want to borrow and how the loan will help you.
Remember, banks want to lend money to businesses they think will be able to pay them
back. Make sure you impress the bankers, but you must be honest about your situation.
NOTE: Because Worth! is set in the mid-1800s, the dollar amounts reflect currency values
closer to that time period.

Business: Peale Farm
Applicant(s): Mr. and Mrs. Peale and family, or any combination thereof
Farming is a tough business. The Peale farm has had some bad spells, but this year’s
harvest is looking great. The farm is in excellent shape: It has several head of cattle
and a good team of horses for fieldwork. The requested loan amount is $300 for
planting supplies for next spring, and that is all that is needed assuming the harvest
is good.

Lesson Plan

Worth!

Handout 1: Loan Applicant Roles and Directions (page 2 of 4)

Business: Danver Farm
Applicant(s): Mr. and Mrs. Danver and family, or any combination thereof
The Danver farm needs a new barn because the current shed is too small for animals. Mr.
Danver has $250 in savings, but he would like to use those funds to buy some animals for
additional income. If he had a few head of cattle, and perhaps some sheep, he might be able
to offset losses if there is a bad harvest. This is his second attempt at successful farming. His
first farm was foreclosed on several years ago by the bank in his home state. The requested
loan amount it $600.
Directions
1. Read your role description carefully to gain information about your current financial
situation and your reason for seeking a loan.
2. When it is your turn, present your case to both banks at the same time. Explain your situation, emphasizing how much money you want to borrow and how the loan will help you.
Remember, banks want to lend money to businesses they think will be able to pay them
back. Make sure you impress the bankers, but you must be honest about your situation.
NOTE: Because Worth! is set in the mid-1800s, the dollar amounts reflect currency values
closer to that time period.

Business: Clemson Farm
Applicant(s): Mr. and Mrs. Clemson and family, or any combination thereof
The farm is in desperate need of financing for a new team of horses. There is no cash
on hand and the family is barely getting by making payments with money borrowed
from family members, who are no longer able to help. The requested loan amount is
$300. If the harvest is good, the farm will make it another year. The family already
has a loan for their land.

Lesson Plan

Worth!

Handout 1: Loan Applicant Roles and Directions (page 3 of 4)

Business: Gantry Ranch
Applicant(s): Mr. and Mrs. Gantry and family, or any combination thereof
Being a cattle rancher is a great business because Mr. Gantry works for himself. This year, however,
he has spent most of his time searching for water for his herd and trying to get along with the
farmers. The farmers think he has been cutting their fences so that his cattle can go wherever
they want. This is not true of Mr. Gantry, but several area ranchers have been cutting fences.
He desperately needs a $900 loan to buy some land near his ranch with a good source of
spring water. He already has a loan with the bank in town. His cattle are his major asset, but
without rain soon or a loan for more land, he will no longer be in business.
Directions
1. Read your role description carefully to gain information about your current financial
situation and your reason for seeking a loan.
2. When it is your turn, present your case to both banks at the same time. Explain your situation, emphasizing how much money you want to borrow and how the loan will help you.
Remember, banks want to lend money to businesses they think will be able to pay them
back. Make sure you impress the bankers, but you must be honest about your situation.
NOTE: Because Worth! is set in the mid-1800s, the dollar amounts reflect currency values
closer to that time period.

Business: Mercantile
Applicant(s): Mr. and Mrs. Owens and family, or any combination thereof
Owning a mercantile has been a good life for the Owens. They have had a steady
income and are now paying to send their two children to college back East. Their
building is paid for, but they would like to add a restaurant on the side. They have no
outstanding debt. They would like to get a loan for $900.

Lesson Plan

Worth!

Handout 1: Loan Applicant Roles and Directions (page 4 of 4)

Business: Cobbler (Shoe repair)
Applicant(s): Mr. Cordimas and family, or any combination thereof
Mr. Cordimas moved to the United States from Greece several years ago. He learned
to work with leather as a young child and has been a successful cobbler for several
years. He owns his own building and has a couple hundred dollars in savings. He is
asking for a $900 loan to expand his business and possibly hire an additional worker.

Lesson Plan

Worth!

Handout 2: Loan Officer Directions
Directions
1. Your bank collects deposits from customers and makes loans hoping to earn a profit. You
will hear from six businesses applying for loans. You must give loans in increments of $300,
$600, or $900 and in the full amounts requested. You have $1,800 available to lend and may
make no more than four loans. There is another bank in town in competition with you. After
you make the loans and profit and loss are calculated, the bank with the most profit (or least
amount of loss) will stay in business, while the other bank will be forced to close.
2. As you listen to the loan proposals, you may ask relevant questions, such as “Do you have
collateral to back the loan?” “Are you successful?” “How long have you been in business?”
or “Have you had success with loans in the past?” You may take notes.
3. After you have heard from all six businesses, meet with the loan officers in your bank to
choose up to four loans to grant. Below, check off the businesses granted loans.
4. Calculate your profit or loss based on the outcomes defined on Visual 2 (to be displayed
after the loans are granted).

_____ Business: Tinkering (Repair) Shop (Mr. and Mrs. Collins, Owners)
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Peale Farm
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Danver Farm
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Clemson Farm
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Gantry Ranch
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Mercantile (Mr. and Mrs. Owens, Owners)
Loan amount requested __________ # Rolled __________ Profit or loss __________
_____ Business: Cobbler (Shoe Repair) (Mr. Cordimas, Owner)
Loan amount requested __________ # Rolled __________ Profit or loss __________
Total bank profit or loss ____________________

Lesson Plan

Worth!

Handout 3: Assessment
Directions: One of the nation’s leading investment banks just hired you. This bank
makes loans to large corporations and even governments around the world. The bank
loan department has decided which loan applicants will or will not receive a loan.
Your job is to correctly use all the terms in the word bank and write a letter to the
company or government explaining whether its loan application was accepted or
rejected. Be sure to write in complete sentences and in paragraph form.

Word Bank
reward

interest

bank

risk

principal

collateral

Lesson Plan

Worth!

Standards and Benchmarks
National Standards in Economics
Standard 10: Institutions evolve and are created to help individuals and groups accomplish
their goals. Banks, labor unions, markets, corporations, legal systems, and not-for-profit
organizations are examples of important institutions. A different kind of institution, clearly
defined and enforced property rights, is essential to a market economy.
•

Benchmark 1, Grade 4: Banks are institutions where people save money and
earn interest, and where other people borrow money and pay interest.

Standard 12: Interest rates, adjusted for inflation, rise and fall to balance the amount saved
with the amount borrowed, which affects the allocation of scarce resources between present
and future uses.
•

Benchmark 1, Grade 8: An interest rate is a price of money that is borrowed or
saved.

•

Benchmark 4, Grade 12: Riskier loans command higher interest rates than safer
loans because of the greater chance of default on the repayment of a risky loan.

Common Core State Standards: Grades 6-12 Literacy in History/Social Studies,
Science, & Technical Subjects
History/Social Studies
•

Key Ideas and Details
CCSS.ELS-Literacy.RH.6-8.1: Cite specific textual evidence to support analysis of
primary and secondary sources.
CCSS.ELS-Literacy.RH.6-8.2: Determine the central ideas or information of a
primary or secondary source; provide an accurate summary of how key events or
ideas develop over the course of the text.

•

Craft and Structure
CCSS.ELS-Literacy.RH.9-10.4: Determine the meaning of words and phrases as
they are used in a text, including vocabulary describing political, social, or economic
aspects of history/social science.

Writing
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Range of Writing, Grades 9-10
CCSS.ELS-Literacy.WHST.9-10.10. Write routinely over extended time frames
(time for reflection and revision) and shorter time frames (a single sitting or a day
or two) for a range of discipline-specific tasks, purposes, and audiences.