Example 1: Savings account: You are considering investing in a bank account which pays 4.6% per year. You want to express the interest you earn in terms of the amount invested.

Choose variables.

Let I represent the interest earned, and let x represent the amount invested.

Relate the interest to the amount invested.

I = (4.6% of x)

Convert the percentage to a decimal.

Since , the decimal is 0.046.

Express interest in terms of x using this decimal.

I = 0.046 * x

Calculate the interest earned if $12,500 is invested.

I = 0.046 * 12,500 = 575

The interest on the $12500 invested
at 4.6% is $575.