You wish to purchase a property for $600,000. You intend to make a 20% downpayment and you have the money to do so. You have two mortgage choices. You can finance the remaining 80% with a 30 year fixed rate mortgage at an interest rate of 2.75% with $3000 in closing costs. Alternatively, you can choose a 30 year, 5/1 ARM with an interest rate of .5%. The ARM has closing costs of $7000. The ARM has an annual cap of 1% and a lifetime cap of 5%. Assume a worst case scenario (for you, the borrower) for interest rates throughout. What is the effective rate on the ARM if you keep the property 30 years or longer? Multiple Choice 2.93% 178% 3.10% 2.44%