Homework - Financial Calculations Please read the following carefully and answer questions #1-6. All of the information you need is here! Inspired by this class you are planning your first investment property purchase. You found several pieces of land close to the college campus and are considering options to build student housing on it. The land is not expensive but because of permitting it could take up to 2-3 years to get the project off the ground Knowing this the seller is willing to give you a purchase option subject to all approvals in place You worked through college and have approximately $45,000 in savings. You do not plan on purchasing a home right away and landed a good job. Delaying the home purchase is because the job could require significant travel for the first few years so renting is the best option. Lastly, you have a good college friend that has given you a hand outlining the project, finding some finance options and reaching out to developers for costs to build the student housing. Basics of what you both found is below Project Information: Land Cost: $60,000 (10% deposit required at signing, balance due at closing) Land purchase costs: $5,000 Development Costs: $1,500,000 Bank Financing: 75% of Land and Development Costs Current Bank Investment Rates: Consumer Money Rates Friday, September 07, 2018 CHANGE IN PCT. PTS YIELDRATE (%) 52-WEEK Interest Rate Last Wk Ago High Low 52-Wk 3-Yr Federal-funds ratetaget 175-2.001.75-2.00 1.75 1.00 0.75 1.75 5.00 5.00 Money market, annual yield 0.46 0.45 0.53 0.25 0.19 0.20 Prime rate* 5.00 4.25 0.75 1.75 Five-year CD, annual yield 30-year mortgage, fixed 15-year mortgage, fixed Jumbo mortgages, $424,100-plus 1.83 1.83 4.574.55 4.01 3.99 1.83 1.43 0.38 0.38 4.69 3.73 0.83 0.68 4.14 2.991.02 0.93 4.80 4.77 4.96 4.21 0.53 0.34 Five-year adj mortage (ARM) 4.37 4.364.78 3.22 1.141.09 4.43 4.43 New-car loan, 48-month 4.52 2.99 1.36 1.40 Base rate posted by 70% of the nation's largest banks. Source: SX Financial Information. WSJ Market Data Group. Bankrate.com www.wsj.com/mdc/public/page/mdcbonds.html