** CALCULATING INTEREST LESSON PLAN**

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Teaching Materials

Lesson Excerpt:

**How do we calculate interest?**

First, let’s learn about some of the terms associated with interest.

**What is interest?**

*Interest is an amount of money that you earn or pay.* Interest is directly connected with how money is used. If you borrow money, then you are going to be paying interest. If you are saving money in a savings account, then you are going to be earning interest.

**What is principal?**

Principal is the amount of money that you start with. It is the original amount that you are either saving or borrowing.

**What is the rate?**

The rate is the percentage that the bank is willing to pay you for using your money. “Using your money” is probably a funny way to think about this, but it is what the bank does. Because of this, the bank pays you by using a percentage. It agrees to pay you a percentage back on your money, this is interest earned.

The rate can also be the percentage that you pay. If you have borrowed money, the rate is the percentage of the borrowed amount that the credit card company or bank will charge you for using their money.

**How does time matter?**

Continued...

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