State Federal Bank (SFB) offers two borrowing options to businesses: (1) a simple interest loan with a 7 percent interest rate and no compensation balance and (2) a discount interest loan with a quoted rate equal to 6 percent that requires a 10 percent compensation balance. If a firm needs a six-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 which option should be chosen?