Suppose a borrower takes out a $175,000 fixed rate, 30-year mortgage with an annual interest rate of 4.75%, paid monthly. The borrower pays $4,500 in up-front financing fees and the lender charges 2.5 discount points.

a) Provide an intuitive explanation for your answer using 2-4 sentences.

b) Suppose you are the borrower. Based on the effective borrowing costs, which loan would you choose? Explain your answer in 1-2 sentences.

c) Suppose you are the lender. Based on the lenders yield, which loan would you prefer? Explain your answer in 1-2 sentences.