Q11. "A" is considering borrowing S1.5 million from his friend for five years to finance his purchase of a property. The terms of this loan agreement are still being negotiated. The four available options for "A" are to either pay (i) 7.5% simple interest annually, or (ii) 6.4% interest compounded annually, or (iii) 6.5% annual interest compounded quarterly, or (iv) 6.3% annual interest compounded continuously. "A" will repay the amounts (accumulated interest + principal outstanding) in one lump sum at the end of the fifth year. Which one of the four scenarios would be the best choice for "A"? Show your calculations. Use Excel or a calculator.

(a) 7.5% Simple Interest (b) 6.4% Compound Interest (annual compounding) (c) 6.5% Compound Interest (quarterly compounding) (d) 6.3% Annual Interest (continuously compounded)

Q12. In question 11 above, if "A" were to pick the option best suited for him, what will be the relative dollar savings from the option he chooses relative to the next best option that he would obviously reject? Show your calculations. Use Excel or calculator.

(a) $8,129 (b) $25,129 (c) $9,823 (d) $15,307

Q13. The total expected return from a property investment is 11%. If the annual NOI growth rate is 5%, "A" wants to know what is the implied cap rate? Show your calculations.

(a) 6.0% (b) 8.0% (c) 9.0% (d) 16.0%

Q14. If the property is generating $150,000 in NOI and the cap rate for similar properties is 13%, "A" wants to know what should be the purchase price for the property? Show your calculations.

(a) $825,981 (b) $953,220 (c) $1,153,846 (d) $1,200,000

Q15. "ABC Banking Corporation" offers to lend "XYZ" $1 million for an equivalent nominal annual rate (ENAR) of 10.0%. ABC informs XYZ that the payments will be made semi-annually, and the interest will also be compounded semi-annually. What is the effective annual yield (EAY or EAR) of this loan? Show your calculations.

(a) 10.00% (b) 10.25% (c) 12.00% (d) 12.5%

Q16. For the loan in question 15 above, ABC informs XYZ that the interest will now be compounded quarterly, rather than semi-annually, and the ENAR is still 10%. What is the effective annual yield (EAY or EAR) on this loan? Show your calculations.

(a) 10.38% (b)10.90% (c) 10.25% (d) 10.00%