Assume that you have purchased a home and can qualify for a $300,000 loan. You have narrowed your mortgage search to the following two options:

Mortgage B	Mortgage A
Loan term: 15-years Annual interest rate: 4.5 percent Monthly payments Up-front financing costs: $7,500 Discount points: 3	Loan term: 30 years Annual interest rate: 5 percent Monthly payments Up-front financing costs: $5,500 Discount points: 3

Note: 1 discount point = 1% of loan amount

1. (3 points) Calculate the effective borrowing cost to the borrower.
2. (3 points) Compute Lenders Yield.
3. (3 point) Based on the effective borrowing cost, which loan would you choose? Explain your answer using your calculations from a) and b).