Simple interest pays rent on the principal only, forever. Compound interest is kinder: at the end of each year the interest joins the team, and NEXT year's interest is computed on the whole balance — the interest starts earning interest of its own. The formula is $A = P(1 + r)^{t}$ (read aloud: A equals P times one-plus-r, to the power t).

Two things to hold gently. $A$ is the whole amount — principal and interest together, the number on the statement — not just the earnings. And $(1 + r)$ is the year's growth factor: at 10%, every year multiplies the balance by 1.1. Three years is $1.1 \times 1.1 \times 1.1$, which is exactly what the little $t$ upstairs is counting.