Lando Calrissian, a TRSM real estate alumnus, purchased a home on the corner of Ontario and Dundas. Last month the house had a market (appraised)value of $600,000.00, but today he discovers that the house value has depreciated by five percent since then. Today is also the due date for his monthly payment on a mortgage which has a discounted unpaid balance of $589,000.00 Lando is tempted to strategically default on his mortgage. Knowing that Lando is trying to make the decision between defaulting and repaying the mortgage, his lender informs him that the act of default by itself, will impose a direct cost to him, independent of his loss of equity, and that he needs to take this into account when thinking about defaulting. The lender also gives Lando an estimate, expressed as a percentage of the house value at which Lando would be indifferent between defaulting and repaying in the absence of default costs, of the dollar costs he will incur in the event of default. The lender has no idea of what his real default cost would be, but wants to give Lando an estimate that will dissuade him from defaulting. To do this, the lender has to calculate the critical percentage that would make Lando exactly indifferent to paying his mortgage coupon today or defaulting. What is this value? 0% 1% 7% 12% 3%