please explain this question using a financial calculator

Question 22 (2 points) Listen Saved What would be the real cost of borrowing in the following case? A home equity loan is advertised at 3 percent compounded annually, however, there is a legal fee of $400 and appraisal fee of $450 to set up the house as collateral. If Sarah needs to borrow $20 000 for one year, at which time will be able to repay the full amount, what is the effective rate of borrowing the $20 000 for the year? 7.25% 7.29% 3.04% 4.25%