What is the effective annual rate for each option? 2 answers below »

Consider the following options available to a mortgage borrower:

Loan Amount

Interest Rate

Type of Mortgage

Discount Point

Option 1

$100,000

6.75%

30-yr fixed

none

Option 2

$150,000

6.25%

30-yr fixed

1

Option 3

$125,000

6.0%

30-yr fixed

2

What is the effective annual rate for each option?

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