let us assume,
$y=\lim_{n->\infty}(1+\frac{1}{n^{2}})^{n}$
taking log on both sides,
$\ln y=\lim_{n->\infty}n\ln (1+\frac{1}{n^{2}})$
let take,
$z=\frac{1}{n}$ ,so as,$n-> \infty$ then $z-> 0$
$\ln y=\lim_{z->0}\frac{ln(1+z^{2})}{z}$
$\ln y=\lim_{z->0}z*\frac{ln(1+z^{2})}{z^{2}}$
let assume, $w=z^{2}$ so as z->0 so w->0.
$\ln y=\lim_{z->0} z * \lim_{w->0} \frac{\ln (1+w)}{w}$
$\ln y=0*1=0$
as ,$\lim_{w->0} \frac{\ln (1+w)}{w}=1$
$\lim_{z->0} z=0$
so,$\ln y=0$
y=1.
so correct answer is C.