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secondary 3 | E Maths
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So if a sum of $10000 earns simple interest at a rate of 10% per annum for 3 years (I wished my bank paid me that well), then I earn $1000 interest in year 1, $1000 interest in year 2 and $1000 interest in year 3, for a total of $3000 worth of interest.
In compound interest measurements, the interest acts on the accumulated amount at the end of each interval (often yearly, but can be half yearly, monthly etc as well).
Suppose a sum of $10000 earns compound interest at a rate of 10% per annum for 3 years, compounded yearly.
Then at the end of year 1, $1000 interest is earned. The new sum of money is now $11000. In the second year, the 10% acts on this $11000 (instead of the $10000 original amount) for an interest of $1100 in the second year. In the third year, the 10% acts on the new $12100 for an interest of $1210 in the third year. Hence, the total sum at the end is $13310 (or a total interest earned of $3310 over the 3 years).
Your formula used is valid for compound interest measurements. The simple interest formula is as shown in my answer.