Nancy wants to receive the most return on a $50,000 investment. She has two options. Option 1 gives annual interest at 5% compounded yearly. Option 2 gives annual interest at 3.5% compounded monthly.

Which option is better after 3 years, and what is the difference in earned interest?

Option 1 earns more interest by $3,581.52.
Option 2 earns more interest by $3,581.52.
Option 1 earns more interest by $2,396.13.
Option 2 earns more interest by $2,396.13.