Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please, help me solve I cannot figure this out. Assume that you are a looking to obtain a commercial real estate loan for a property

Please, help me solve I cannot figure this out.
image text in transcribed
Assume that you are a looking to obtain a commercial real estate loan for a property that is for sale at $10,000,000 and generates $1,000,000 per year in NOI (Net Operating income). You have $2,000,000 in cash that can be used as the equity (down payment) for the loan. All loans have a 25 year amortization period and a 5 -year term. (A) What is the effective cost of borrowing (lender's yield) expressed as a percentage (\%) for each of the following loans for the 5 -year term? (B) What is the outstanding loan balance (including penalties that may be due) payable to the lender at the end of the 5 -year term? 1. Lender \# 1 offers you an interest only mortgage with a 9% interest rate. 2. Lender \# 2 offers you a normal constant payment mortgage with a 9% interest rate. 3. Lender \# 3 offers you a constant amortization mortgage with a 9% interest rate. 4. Lender \# 4 offers you an adjustable-rate mortgage with a 2% teaser rate for 12 months, 3% for next 24 months, and 11% thereafter. 5 . Lender \# 5 offers you an 8.5% normal constant payment mortgage with a 6% upfront loan origination fee. 6. Lender \# 6 offers you an 8.5% normal constant payment mortgage with a $150/ month loan

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Short Selling

Authors: Greg N. Gregoriou

1st Edition

0123877245, 978-0123877246

More Books

Students also viewed these Finance questions