28. You are receiving a Convertible Mortgage to purchase an office building. The current interest rate on a standard FRM (similar mortgage without convertibility option) is 8%. What of the following statements is not true?

Select one:

A. The expected yield on convertible mortgage will be higher than 8%.

B. The interest rate on convertible mortgage is lower than 8%.

C. The interest rate on convertible mortgage is higher than 8%.

D. The convertible mortgage gives the lender the option to take a higher value between equity amount and mortgage balance.

27. A property could be sold today for $1,950,000 (net of selling expense). It has a loan balance of $1 million and if sold the investor would incur a capital gains tax of $250,000. The investor has determined that if sold today, she would earn an IRR of 15% on equity for the past five years. If not sold, the property is expected to produce after tax cash flow of $50,000 from operations over the next year. At the end of the year, the property value is expected to remain at $1,950,000 (net of selling expense), the loan balance would decrease to $940,000 and the amount of capital gains tax due is expected to increase to $275,000. What is the marginal rate of return for keeping the property one additional year?

Select one:

A. 12.2%

B. 13%

C. 15.3%

D. 14.1%