Consider the following options available to a mortgage borrower:

 

Loan
Amount

Interest
Rate
(%)

Type of
Mortgage

Discount
Points

Option 1

$100,000

6.75

30 year fixed

none

Option 2

$150,000

6.25

30 year fixed

1

Option 3

$125,000

6

30 year fixed

2

 What is the effective annual rate for each option?