You decide to buy a house with price of $350,000. You put 20% down payment and consider a 30-year fixed rate mortgage to pay the remaining balance, which is $280,000. The lender offers you two mortgage choices. For simplicity, assuming that there is no origination cost for each choice.

Choice Mortgage Rate Points

1 5.5% 0

2 5.0% 3

What is the annual effective cost of the loan for Choice 2 if you hold the loan for the entire term?

Group of answer choices

5.27%

5.47%

5.67%

$8,400