Answer:
The correct option is 1.
Step-by-step explanation:
It is given that Inez has to pay 4 percent in closing costs and 16 percent for the down payment on a purchase of $225,500 with an ARM.
So, Inez has to pay 20% of $225,500.

Therefore Inez has to pay $45100 as closing cost and down payment.
Over the life of the loan, she will pay $262,072.72.
The total cost of her house is the sum of $262,072.72 and $45100. Because the total cost is the sum of down payment, closing cost and the payments over the life of the loan.

Therefore the correct option is 1.