Multiple Choice Question

Alicia invested $$1,000$ three years ago at a fixed rate of $5$ percent interest. Which one of these illustrates the compounding of interest on this investment?

Alicia received $$50$ in interest in years $1,2,$ and $3.$

Alicia spends her $$50$ of interest each year as soon as she receives it$.$

Alicia withdrew $$1,050$ two years ago.

Alicia's investment was worth $$1,050$ after one year and $$1,102\mathrm{.}50$ after two years.