For this section, we are playing the role of a Real Estate Investor looking to buy a new property. After seeing dozens of properties, we would like to request a loan from the bank but are unsure how much we can ask for. We will create a procedure that will tell us the maximum amount that we can safely request from the bank based on the 3 most common approaches for Maximum Loan (Debt) Calculation that banks use. CONTEXT: (Optional, but good to know what we are doing) When a real estate investor requests a loan from the bank, the bank personnel will evaluate how much that person may borrow based on 2 criteria: NOTE: (The goal is to recreate these formulas as provided so that we can be run from a procedure. This will allow us to compare the numbers they provide. The key for you will be to create 1) separate functions, 2) run them from a procedure, 3) choose the lowest value as the winner between the 2] Maximum Loan to Value Ratio: The banker will look at what is the maximum loan the bank is willing to offer for any investment. For example, there may be a policy that says the bank can only finance up to 75% of the value of any project. Therefore, if a person wanted a loan for a property worth $100,000, the maximum loan allowed would be 75% of the $100,000 or $75,000 ($100,000*75% = $75,000) Loan-to-Cost: The banker may look at the expected costs (what comes out of the pocket) the investor will have rather than the expected value of the project. The bank may have a policy that they can only finance up to a certain percentage of the cost of the project Cost: What comes out of the pocket of an investor to acquire the project. Value: What the project is worth based on how much income it can generate. 2. 5pts. Create a function that calculates the Maximum Loan to Value Ratio and returns the maximum loan amount. Recreate this calculation based on the formula below: Maximum Loan Amount := Value of Project * Maximum Loan to Value Ratio wwwww GOAL: a) Set the "Maximum Loan to Value Ratio" in your function as a fixed 75% or .75. b) Get the Value of the project as an input for your calculation. c) Return the Maximum Loan Amount. Create a function that calculates the Maximum Loan to Cost Ratio and returns the maximum loan amount. Recreate this calculation based on the formula below: Maximum Loan Amount := Cost of Project Maximum Loan to Cost Ratio w wi GOAL: d) Set the "Maximum Loan to Cost_Ratio" in your function as a fixed 80% or.8. e) Get the Cost of the project as an input for your calculation. f) Return the Maximum Loan Amount. 4. 5pts. Create a function that calculates the Maximum Loan Amount to Cost Ratio and returns the maximum loan amount Recreate this calculation based on the formula below: Maximum Loan Amount := Value Project/(Minimum DSCR*Debt Service per Dollar) GOAL: g) Set the Minimum _DSCR" in your function as a fixed 1.25. h) Get the Value of the project as an input for your calculation. i) Get the interest rate as an input for your calculation. 1) Set the "Debt Service per Dollar" in your function to a fixed 0.0688. k) Return the Maximum Loan Amount. Sample formula: Maximum Loan Amount = Value Proiect/(1.25*0.0688) w a 5. 5pts. Now it is time to put these together. We will create a procedure that takes the Value of the project, and its costs as inputs. It must also call the functions mentioned above to get the 2 estimates of the Maximum loan amount. Finally, compare the 2 estimates to determine which one is the lowest. Print the following 3 messages in that order: "Your maximum loan amount is (Lowest Amount]!" "Your Maximum loan based on the Loan to Value is: [Maximum LoantoValue]." "Your Maximum loan based on the Loan to Cost Ratio is: [Maximum LoanToCost]." 2 Where: [Lowest Amount) is the lowest of the 3 maximum loans you got from the functions. [Maximum LoantoValue) is the maximum loan from the Maximum Loan to Value Ratio function. [Maximum LoanToCost) is the maximum loan from the Maximum Loan to Cost Ratio function
