Question 1

Discussion with lenders indicates that a loan can be obtained for 75% of a property's market value. Loan terms will probably be 8% interest, 20-year amortization (monthly payments), with the rate renegotiable after 7 years. The property is estimated to be worth $200,000.

A. How much can be borrowed?

B. What will be the annual debt service?

C. What is the expected annual loan constant?