Question $11(10$ points$)$

Ace Development Company is trying to structure a loan with the First National

Bank. Ace would like to purchase a property for $$2\mathrm{.}5$ million. The property is

projected to produce a first year NOI of $$200,000.$ The lender will allow only up to

an $80$ percent loan on the property and requires a DCR in the first year of at least

$1\mathrm{.}25.$ All loan payments are to be made monthly, but will increase by $10\%$ at the

beginning of each year for five years. The contract rate of interest on the loan is

$12\%.$ The lender is willing to allow the loan to negatively amortize; however, the

loan will mature at the end of the five$-$year period. What will the balloon payment

be at the end of the fifth year $($rounded to the nearest dollar$)?$

Question $12(10$ points$)$

In question $11,$ if the property value does not change, what will the loan to value

ratio be at the end of the five$-$year period $($expressed in decimals, rounded to three

digits$)?$