Helen is considering taking out a loan of $80,000 to buy an investment property in rural NSW. The details for the loan are as follows:

Repayments will be made on a monthly basis. However, the first repayment will be made exactly THREE months from today.

The loan will be repaid by 240 level repayments

The interest charged on the loan is currently 6% p.a. effective

Using this information, answer the following questions.

PLEASE SHOW WORKING OUT FOR ALL

a) State clearly the type of effective rate that should be used in an annuity formula for Helen's loan as described above (e.g., "effective quarterly rate", "effective weekly rate", etc.).

Then determine the value of this effective rate.

b) Draw a cash flow diagram for Helen's loan described above, and then determine the size of the level repayment for Helen's loan.

c) If the interest rate charged on Helen's loan was instead 6% p.a. compounding monthly, would her repayments be larger or smaller? Justify your answer.