What Would Be the Real Cost of Borrowing in the Following

Multiple Choice

What would be the real cost of borrowing in the following case? A home equity loan is advertised at three percent compounded monthly,however,there is a legal fee of $400 and appraisal fee of $450 to set up the house as collateral.If Sarah needs to borrow $20 000 for one year,at which time will be able to repay the full amount,what is the effective rate of borrowing the $20 000 for the year?

A) 3) 04%
B) 7) 29%
C) 7) 25%
D) 4) 25%