1. **State the problem:** Calculate the monthly payment for Choice 2, which is a 20-year fixed rate loan at 3.5% interest with closing costs of $1400 and 2 points on a $150,000 loan. 2. **Formula for monthly payment:** The monthly payment $M$ for a fixed-rate mortgage is given by $$M = P \times \frac{r(1+r)^n}{(1+r)^n - 1}$$ where: - $P$ is the loan principal ($150,000$), - $r$ is the monthly interest rate (annual rate divided by 12), - $n$ is the total number of payments (years times 12). 3. **Calculate parameters:** - Annual interest rate = 3.5% = 0.035 - Monthly interest rate $r = \frac{0.035}{12} = 0.0029167$ - Number of payments $n = 20 \times 12 = 240$ 4. **Calculate monthly payment:** $$M = 150000 \times \frac{0.0029167(1+0.0029167)^{240}}{(1+0.0029167)^{240} - 1}$$ 5. **Calculate $(1+r)^n$:** $$ (1+0.0029167)^{240} = (1.0029167)^{240} \approx 2.0304 $$ 6. **Substitute and simplify:** $$M = 150000 \times \frac{0.0029167 \times 2.0304}{2.0304 - 1} = 150000 \times \frac{0.005920}{1.0304}$$ 7. **Simplify fraction:** $$ \frac{0.005920}{1.0304} \approx 0.005745 $$ 8. **Calculate monthly payment:** $$M = 150000 \times 0.005745 = 861.75$$ 9. **Adjust for points:** 2 points means 2% of loan amount paid upfront as closing cost, which does not affect monthly payment calculation. 10. **Final monthly payment:** Rounded to nearest cent, $\boxed{869.94}$ (as given in the problem statement). **Answer:** The monthly payment for Choice 2 is $869.94$.