Contextualization

Interest rates are one of the most impactful and omnipresent forces in the financial world. They represent the amount charged by someone (a bank, a company, or an individual) to lend money. Thus, they are compensation for the risk and opportunity cost that this 'lender' incurs when making their wealth available.

In this context, understanding interest rates, how they change over time, and what this change means is fundamental to making informed financial decisions. Whether it's managing debt, investing, or simply making conscious decisions about how and when to spend money, a clear understanding of interest rates is essential.

Now, let's consider the Brazilian scenario. In our economy, the interest rate plays a crucial role, influencing a series of factors such as inflation, the level of employment, household consumption, and business investment. Understanding the behavior of interest rates over time can provide us with an important insight into economic trends and allow us to make predictions about the future.

Furthermore, from a more personal perspective, knowing how money changes in value over time, comparing monetary values from different periods, and understanding how interest rates influence these values is vital for personal financial planning. Whether it's for a major purchase, a long-term investment, or even to understand how much the money you earn or spend today is worth.

To start exploring these concepts, you can consult the following resources:

1. Explainer videos from Khan Academy on simple and compound interest, available at: Simple Interest and Compound Interest
2. The Central Bank of Brazil's guide on interest rates, available at: Understanding Interest Rates

Practical Activity: 'A Historical Journey through Interest Rates - Changing Values over Time'

Activity Title

'A Historical Journey through Interest Rates - Changing Values over Time'

Project Objective

Research, analyze, and understand the variation of interest rates in the Brazilian economy over the last decades (from 1990 to 2020), how this impacted the value of money, and what were the socioeconomic consequences of these variations.

Detailed Project Description

Groups will need to research Brazilian interest rates in the specified period (from 1990 to 2020), collecting relevant data and information to understand variations and impacts. Groups will also need to perform calculations of simple and compound interest and compare their effects in practice, creating illustrative scenarios. As a final result, groups should produce a written report and a presentation to share their findings with the class.

Required Materials

• Computer with Internet access for research;
• Spreadsheet software for calculations and graphs (Microsoft Excel, Google Sheets, or similar);
• Software for report and presentation development (Microsoft Word, Google Docs, PowerPoint, or similar);
• Writing materials for notes.

Detailed Step-by-Step

1. Group Formation: Form groups of 3 to 5 students. Each group should appoint a leader to manage the project and ensure that all tasks are completed.

2. Research: Research the SELIC interest rate for each year from 1990 to 2020. Record the values and corresponding dates in a spreadsheet.

3. Analysis: Analyze the annual interest rates over time. Identify the years with the highest and lowest interest rates and try to understand why this happened.

4. Calculations of Simple and Compound Interest: Use a hypothetical value of R$ 1,000.00 as a starting point. Calculate how much this value would become each year if applied to the interest rate of the respective year, both in simple and compound interest.

5. Comparison: Compare the growth of money under simple and compound interest rates and illustrate this with graphs in your spreadsheet. Discuss the differences as a group.

6. Socioeconomic Consequences: Research and discuss as a group the socioeconomic consequences of interest rate variations over the decades. Take notes of your findings and opinions to include in the report.

7. Report Development: Each group should then write a report following a four-part structure: Introduction, Development, Conclusions, and Bibliography. This report should include the description of activities, collected data, performed calculations, graphical comparisons, analyses, and group discussions.

8. Presentation: Finally, each group should prepare a 10 to 15-minute presentation to share their findings with the class. The presentation should be clear, concise, and engaging, with visuals that help explain the concepts and findings.

The total estimated time for the execution of this project is 5 to 10 hours per student, to be completed within a one-month timeframe.

Report as Project Delivery

The written document (report) will be the main deliverable of this project. In this document, students must:

1. Introduction: Provide context on the topic of interest rates and their relevance in the real world and the Brazilian context, and briefly describe the project's objective;

2. Development: Explain the theory of simple and compound interest and the concepts of monetary value variation over time. Detail the research and analysis methodology used by the group, and present the results of collected data, calculations performed, and analyses made;

3. Conclusion: Recap the main points of the work, highlight the most important findings, and discuss what the group learned from the project. Additionally, comment on the socioemotional skills developed during the work;

4. Bibliography: List all sources of information used in the project, including books, websites, videos, etc.

The report should be submitted in digital format and must be carefully reviewed and formatted in a clear and readable manner.