First month deposit: 2500
End of first month: 2500 x 106% = 2650

Second month deposit: 2650 + 2500 = 5150
End of second month: 5150 x 106% = 5459

Third month deposit: 5459 + 2500 = 7959
End of third month: 7959 x 106% = 8436.54

So the final sum after 3 months is $8436.54.

The term compounding simply means that interest always acts on the new, latest sum (rather than the original sum).

However, unlike the usual case where a single sum is deposited for several months or years, there is a periodic deposit involved (every month). We will not be able to use the formula for compound interest directly as a result (which requires the fact that there is no periodic deposit).