Final answer:
The tool required to make changes to the paragraph's format, including capitalization, punctuation, and layout, is a Formatting tool. It is crucial to proofread your work even after using such tools to catch nuanced errors that formatting tools may not detect.
Step-by-step explanation:
The tool that would transform the first paragraph into the second one is likely Option 3: Formatting tool. This is inferred from the tasks listed such as 'capitalize', 'change to lowercase', 'insert a comma', and 'insert a period', which are formatting actions rather than purely grammar or spelling corrections. A formatting tool can also insert an apostrophe and handle other tasks like 'insert quotation marks', 'insert space', 'close up space', or 'transpose letters or words'. Moreover, the editing process involves checking for phrasing, mechanics, and wording, which can be aided by a formatting tool. Finally, checking that the format adheres to style guides such as MLA or APA is also part of a formatting tool's capabilities.
It is important to read through the edited work out loud or have your device read it to you to catch any potential errors that could have been missed during the editing process. Even with electronic assistance, careful proofreading by the writer is essential, as not all mistakes are caught by software, and the proofreading process entails multiple steps including ensuring the correct use of words, such as distinguishing 'there' from 'their'.