State Federal Bank $($SFB$)$ offers two borrowing options to businesses: $(1)$ a simple interest loan with a $6$ percent interest rate and no compensating balance and $(2)$ a discount interest loan with a quoted rate equal to $5$ percent that requires a $20$ percent compensating balance. If a firm needs a three$-$month loan, which option should it choose based on rEAR? Assume the firm normally maintains a negligible checking account balance at the bank. Assume there are $360$ days in a year. Do not round intermediate calculations. Round your answers to two decimal places.

Option $1,$ rEAR:

$\%$

Option $2,$ rEAR:

$\%$

Based on rEAR,

$-$Select$-$

should be chosen.