You are considering three loan proposals to finance the purchase of investment property.

The purchase price is RM$500,000$ and the expected net operating income is RM$60,000.$

The alternatives are:

i$.$ Loan$-$to$-$value ratio is $90$ percent, interest rate is $9$ percent, and terms are $25$ years,

level amortising with monthly payments.

ii$.$ Loan$-$to$-$value ratio is $80$ percent, interest is $8$ percent, and terms are $25$ years, level

amortising with monthly payments.

iii. Loan$-$to$-$value ratio is $80$ percent, interest is $7\mathrm{.}5$ percent $+$ three points, and terms

are $25$ years, fully amortising with monthly payments.

$($a$)$ Determine the effective interest rate for each loan, assuming the loan is outstanding

for the full $25-$year amortisation term.

$($b$)$ Suggest the most favourable loan alternative to investor's financial position.