1. Suppose you take a 30-year, one year adjustable, monthly payment ARM of $135,000 with two discount points. Your payment in year one is $943.94, your payment in year two is $1,131.67, and your outstanding balance at the end of year two is $132,843. If you repay the loan at the end of year two, what is the effective cost?

   8.15%

   8.45%

   7.50%

   9.21%

   9.56%