NEXT TWO (2) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: A long-term loan is arranged on a proposed office building. The loan is for a 30 -year amortization and term at 9% per annum, compounded semi-annually, and calls for monthly payments. The lender will advance $780,000 under any circumstances and will increase this to $850,000 if a satisfactory leasing performance is achieved such that the debt coverage ratio is 1.2 . At 100% occupancy, the property is expected to produce a net operating income of $130,000 per annum. All leases are fully net leases such that the landlord bears no expenses other than vacancy and bad debt allowances. 1. What percentage of space must be leased to obtain the maximum loan amount? (1) 75% (2) 78% (3) 83% (4) 100% 2. What is the expected debt coverage ratio at normal vacancy levels of 3.5% ? (1) 1.45 (2) 1.55 (3) 1.20 (4) 1.33