You plan to purchase a house for $125,000 using a 15-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price and monthly payments. You will not pay off the mortgage early. Assume that you will remain in the house for the full term and ignore taxes in your analysis. The bank has given you two options:

1. 5% interest and zero points. What is the mortgage payment?

2. 4.8% and 1 point. What is the mortgage payment?

3. Which option would you choose and how much would you save?

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