#### When we borrow money for someone or something (like a bank) we have to pay fee. This fee is called interest. How much interest we will have to pay can vary due to many factors including how much we borrowed, how long we are taking to pay it back, and the general country's economic situation. When the economy is doing poorly people are less likely to loan out money, so the fee will be higher and vice versa when the economy is doing well.

Interest is one of the most important aspects of money borrowing and lending. When one entity borrows money from a lender, they must pay a fee when repaying the borrowed amount. The fee is equal to a percentage of the amount borrowed.
There are two types of interests; simple and compound.
Simple interest is one which depends upon the principal amount of the loan or deposit. To calculate simple interest, you need to use the following formula;
I = PRT. Here; I is the interest, P is the principal amount, R is the interest rate expressed in percentage, and T is the time period for the loan. It is a straightforward way to calculate the total interest that has to be paid.
Compound interest on the other hand is one which depends not only on the principal loan amount but also on the interest that is accumulated on it on a specific period of time. Calculating compound interest is a bit complex in comparison to calculating the simple interest.
The general formula to calculate compound interest is;
Compound Interest=[P(1 + i)^{n} ] - P. Here; P is the principal amount, I is the interest rate, and n is the number of compounding periods. These worksheets explain how to calculate simple interest. While this may seem an endless task it will hold a great deal of importance in your future life when banking and buying a home.