State Federal Bank (SFB) offers two borrowing options to businesses: (1) a simple interest loan with an 8 percent interest rate and no compensating balance and (2) a discount interest loan with a quoted rate equal to 6 percent that requires a 20 percent compensating balance. If a firm needs a three-month loan, which option should it choose based on r_EAR? 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, r_EAR: %

Option 2, r_EAR: %

Based on r_EAR: (Option 1 or 2) should be chosen.