1. You plan to purchase a home for $500,000 and finance it with a 30 year mortgage. Youll make 20% down payment, and monthly payments. Your bank offers you the following two options:

   1. Option 1: mortgage rate of 6%, and 0 point.

   2. Option 2: mortgage rate of 5% and 2 points.

If you plan to keep the house only for 7 years:

1. Compute the effective interest rate on both options,

2. Compute the net present value of savings from option 2,

3. Which option you should choose?