Question 6 (10 points) A property is expected to have NOI of $100,000 the first year. The NOI is expected to increase by 3% per year thereafter. The appraised value of the property is current $1 million and the lender is willing to make a $900,000 participation loan with a contract interest rate of 8%. The loan will be amortized with monthly payments over a 20-year term. In addition to the regular mortgage payments, the lender will receive 50% of the NOI in excess of $100,000 each year until the loan is repaid. The lender will also receive 50% of any increase in the value of the property. The loan includes a substantial prepayment penalty for repayment before year 5, and the balance of the loan is due in year 10. Assume that the appraiser would estimate the value in year 10 by dividing the NOI for year 11 by a 10% capitalization rate. Calculate the effective cost to the borrower (to the lender) of the participation loan assuming the loan is held for 10 years (in decimals, rounded to 3 digits). A/ Question 6 (10 points) A property is expected to have NOI of $100,000 the first year. The NOI is expected to increase by 3% per year thereafter. The appraised value of the property is current $1 million and the lender is willing to make a $900,000 participation loan with a contract interest rate of 8%. The loan will be amortized with monthly payments over a 20-year term. In addition to the regular mortgage payments, the lender will receive 50% of the NOI in excess of $100,000 each year until the loan is repaid. The lender will also receive 50% of any increase in the value of the property. The loan includes a substantial prepayment penalty for repayment before year 5, and the balance of the loan is due in year 10. Assume that the appraiser would estimate the value in year 10 by dividing the NOI for year 11 by a 10% capitalization rate. Calculate the effective cost to the borrower (to the lender) of the participation loan assuming the loan is held for 10 years (in decimals, rounded to 3 digits). A/