Kate intends to borrow $5 million for 12 months, in three months time. She is able to borrow with quarterly interest payments and resets at BBSW +0.5% p.a., but fears that rising interest rates will increase her borrowing costs. A 12 month interest rate cap with a strike rate of 7.5% p.a. and referenced to BBSW commencing in three months, is available for the premium of 0.25% p.a. If the BBSW in 3,6,9, and 12 months is respectively 6.9%, 7.4%, 8.2% and 9.0% p.a. i) determine what payments she would make under the loan and the cap ii) calculate her effective borrowing cost with and without the cap Assume 90 day quarters and a 360 day year.