What would be the real cost of borrowing in the following case? A home equity loan is advertised at 4% compounded annually, however, there is a legal fee of $450 and appraisal fee of $350 to set up the house as collateral. If Sharon needs to borrow $30 000 for one year, at which time will be able to repay the full amount, what is the effective rate of borrowing the $30 000 for the year?

a) 6.67%

b) 2.67%

c) 5.17%

d) 5.50%