At 3.5% simple interest per annum the total interest on 2,500 is 2500*3*3.5/100=262.50 (principal*time*rate).
3.5% compounded annually is more:
At end of 1st year interest=87.50 (same as simple interest)
Amount at end of 1st year=2500+87.50=2587.50.
At end of 2nd year: interest=90.56, amt=2,678.06.
At end of 3rd year: interest=93.73, amt=2771.79.
Total interest after 3 years=271.79 (87.50+90.56+93.73).