** CALCULATING PRINCIPAL LESSON PLAN**

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Teaching Materials

Lesson Excerpt:

**What is principal when we are talking about money?**

The principal is the amount of money that is borrowed or saved.

If you put $2500.00 in a savings account, that is the *principal amount of money*. It is the amount of money that you start with.

**What other terms do we need to know when working with money?**

**Interest**

The first term that we need to be familiar with is interest. When we have saved money or borrowed money, often there is a question of interest earned or interest that needs to be paid.

When working with interest, we need to keep in mind that the rate and the time determine the interest. Let’s look at rate.

**Rate **

The rate is the percentage that a bank pays for money in a savings account. It is also the percentage that a credit card company or loan company charges for borrowing money. Rates are often done annually, but sometimes they are calculated monthly as in the case of credit card debt.

**Time**

Time relates to the time that the money is saved or borrowed for. It is the amount of time that the money is in use.

**We can use a formula to calculate money matters.**

Here is the formula that we can use when calculating interest, principal, rate or time.

I = prt

Interest = principal x annual rate x time

**Let’s look at an example.**

Continued...

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