Occupy Student Debt

Gautam Sethi, Bard College, Center for Environmental Policy
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Summary

This assignment allows students to develop a deeper understanding of the power of compounding. It also help improve financial literacy and students can gain a better understanding of the implications of their loan repayment plans on their financial burden.

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Learning Goals

Students should learn the power of compounding and how it can be tamed by even a small increase in loan payments. MATLAB is used to solve a higher-ordered polynomial.

Context for Use

The assignment is appropriate for any student of economics or finance who understands the concept of compounding and discounting. A student skilled in both economics and MATLAB should be able to complete the assignment in about four hours. In my course, this activity is part of the financial modeling module and I need to explain the basics of discounting before handing out this assignment.

Students need beginner MATLAB skills to complete this assignment. Aside from if-else-then control, fprintf, and basic graphing, students need to understand basic optimization and the use of the function fzero.

Description and Teaching Materials

Students should first master the concept of discounting. Students need beginner MATLAB skills to complete this assignment. Aside from if-else-then control, fprintf, and basic graphing, students need to understand basic optimization and the use of the function fzero. MATLAB is used to solve a higher-ordered polynomial. Even though this polynomial can be solved in Excel, it is easier to debug the code in MATLAB and much easier to generate various figures and graphs.
Occupy Student Debt (MATLAB Live Script 167kB Sep11 20)

Teaching Notes and Tips

Assessment

I gave this assignment as a take-home problem set and grade it on the basis of the clarity of the code.

References and Resources