A. Prepare amortization tables for the following 2 mortgages. A $2,000,000 fully amortizing, fixed rate mortgage with a 10 year term, monthly payments, an interest rate of 11%, and $12,000 closing costs. Or, a $2,000,000 interest only, fixed rate mortgage with a 10 year term, monthly payments, and interest rate of 13%, and $2,000 in closing costs.

B. Using the mortgage information prepared in part A, calculate the NPV to an investor of a property with the following characteristics using each mortgage. Purchase Price = $4,000,000 LTV = 50% NOI = $400,000 annually, expected to grow between 1-4% annually A tax rate of 35% Land Value of approximately $500,000 A 10 year holding period The property will be sold at the end of 10 years. A discount rate on the equity investment of 7%.

C. Using the information gathered from A and B, choose which mortgage is best for this property, and determine whether or not the property should be purchased with the best mortgage.