Interest earned on both the initial principal and the interest reinvested from prior periods. Go here to learn more about compound interest.
Compound Interest Homework Problem
you found an investment that pays 15% annual interest, which sounds fantastic
to you! This makes you invest $1000 in to it, how much will you have in
3 years? How much will you have in 7 years? And at the end of 7 years,
how much interest will you have earned, and how much of it will be compounding
You invested $1000 x 15% = $150 simple interest each year, thus total simple interest in 7 years = $150 x 7 = $1,050