You are reviewing loan offers for a 30-year fixed rate mortgage loan in the amount of $225,000. Option 1: mortgage broker has offered an interest rate of 4% with a 1% lender origination fee ($2,250), 1% broker fee ($2,250), and monthly payment of $1,074. Option 2: A mortgage banker has presented a competing offer with a higher interest rate of 4.375%, but with no loan fees. Use effective borrowing cost (EBC) to determine the least cost option: To determine EBC for Option 1, assume you intend to sell your home after making payments fo five years, at which time the remaining balance on the loan will be $203,472. For simplicity, you may assume there are no other 3rd party closing costs (other than the broker fee) associated with obtaining either loan, so that EBC for Option 2 is the same as the note rate (i.e., 4.375%) and you don't have to calculate it. You determine that you should: O Choose Option 1 because EBC for Option 1 is 4.46% which is greater than 4.375% EBC for Option 2 O Choose Option 2 because EBC for Option 1 is 4.46% which is greater than 4.375% EBC for Option 2 O Choose Option 1 because EBC for Option 1 is 4.17% which is less than 4.375% EBC for Option 2 O Choose Option 2 because EBC for Option 1 is 4.17% which is less than 4.375 % EBC for Option 2