What effect do closing costs have on the effective annual rate (EAR)?

Group of answer choices:

They have no effect on the EAR because they are not interest payments.

The have no effect on the EAR because they are paid once, upfront, and are not part of the ongoing interest harges.

They increase the EAR because they increase the total financing costs of the loan.

They reduce the EAR because they are analogous to prepaid interest and thus reduce ongoing interest charges.

They increase the EAR because they increase the compounding fees.