Answer
$7\%$ compounded monthly.
Work Step by Step
Investment $P=\$12,000$.
Time $t=3$ years.
$7\%$ Compounded monthly $(n=12)$
Rate of interest $r=7\%=0.07$.
Compounded interest formula
$A=P\left ( 1+\frac{r}{n} \right )^{nt}$
Substitute all values.
$A_1=12,000\left ( 1+\frac{0.07}{12} \right )^{12\cdot 3}$
$A_1=12,000\left ( \frac{12+0.07}{12} \right )^{36}$
$A_1=12,000\left ( \frac{12.07}{12} \right )^{36}$
$A_1=12,000\left ( 1.23292558748 \right )$
$A_1=14795.1070497$.
$6.85\%$ compounded continuously.
Rate of interest $r=6.85\%=0.0685$.
Interest formula
$A=Pe^{rt}$
Substitute all values.
$A_2=12,000\cdot e^{0.0685\cdot 3}$
$A_2=12,000\cdot e^{0.2055}$
$A_2=14737.6677715$
By comparing both values
$A_1>A_2$.