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P 7 . You need financing for a $ 5 0 0 , 0 0 0 investment in an apartment building. The NOI in the

P7. You need financing for a $500,000 investment in an apartment building. The NOI in the first year is projected to be $35,000. You found a bank willing to underwrite a fully-amortizing, 30-year, fixed rate mortgage with constant monthly payments at an interest rate of 6 percent, compounded monthly.
(a) What is the debt service coverage ratio if the bank underwrites a mortgage at a loan-to-value ratio of 75 percent?
(b) The bank agrees to finance this investment if the loan-to-value ratio of the mortgage is less than or equal to 75 percent and the debt service ratio is greater than or equal to 1.5. What is the largest loan you can get?
Assume that all other contract terms (e.g. APR, full amortization, monthly
compounding) remain the same.

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