Question
A property is being acquired today for $100. The cap rate, or return on assets, is 7.5%, and the investor can obtain a mortgage for
A property is being acquired today for $100. The cap rate, or return on assets, is 7.5%, and the investor can obtain a mortgage for 75% of the property purchase price with an annual mortgage constant (MC) of 6.25%.
a. What is the leverage ratio associated with this transaction? What is the loan-to- equity ratio?
I already know the leverage ratio is 4 (100/25)
What is the LOAN-TO-EQUITY ratio?
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Authors: Mr Mark Gates
1st Edition
1974565491, 978-1974565498
