1. You obtained a 30 year fully amortizing, $300,000 mortgage five years ago from a local bank with an interest rate of 4.0% and monthly payments. Today market interest rates for comparable mortgage investments have dropped to 3.0%. Based on the amortization thus far and the change in market rates, what would an investor be willing to pay the bank for this loan if they assumed it would remain outstanding for the full remaining term of the loan (i.e., no early repayment)?
   1. $339,714
   2. $302,027
   3. $280,441
   4. $273,474
2. You forecast that a property will have Net Operating Income (NOI) of $800,000 next year, using a capitalization rate of 3.75% what is the property’s estimated value? (See Valuation of Income Properties, Chapter 10 in 16^th edition)
   1. $21.3 million
   2. $8.75 million
   3. $3.0 million
3. You are considering purchasing a small commercial property for $2,000,000. A bank has offered you two different loan options, the first would require a down payment of 30% and would have an interest rate of 4.0%. The second option would require a downpayment of only 20%, but the interest rate would rise to 5.5%. Both loans would have 25 year terms. After determining your monthly payment for each, calculate how much you are effectively paying (solving for RATE) for the additional $200,000 being borrowed under the 20% downpayment option.
   1. 15.17%
   2. 9.92%
   3. 9.75%
   4. 14.18%