Add and Minus are at Dash for Cash Credit Union to deposit their money in the savings account. Add wants to deposit $500 in a savings account, but Minus wants to $900 in the savings account. "Add, what's wrong with my idea." Minus whisper cooperatively. "Ok Minus, I understand you're trying to help, but do what is an interest?" Add waits for Minus to respond. "No, I have no idea." "Interest is an amount of money the bank pays you to use your money. The principal is the amount of money of earning interest. For example, you deposit $550 into a new savings account and leave it untouched for 6 months. Your annual interest rate is 2%. How much interest did you earn in those 6 months? What is your account balance?" Add is doing the problem on the separate paper. Here's the equation he wrote:

 

Interest = principal x rate x time: rate is written as a decimal ( % divided by 100) time in years ( # of months divided by 12)

 

550 times .02 times 6 divided by 12 equals 5.50

 

come from?" Minus asked curiously. "Oh yeah, the Annual Interest Rate counts in it, too. Annual Interest Rate is the percentage of the Annual Interest Rate"Pretty Interesting, Add. Where did the principal that you can as interest-based on one year. Problem solved!" "Man." Minus felt guilty. "I wish I could do that." "Don't worry, you will try as long as you practice. So, come on and let's talk to the accountant."