Suppose you are considering the following construction project. The construction phase is one year and all direct costs (excluding interest carry and loan fees) will be $4.8 million. The Second Avenue Bank will provide the construction loan for the project. The bank will finance all of the construction costs and interest carry at an annual rate of 13% plus a loan origination fee of 2.5%. The direct cost draws will be taken down in eight equal amounts commencing with the first month after close, with no draws in the last four months of the project (notice that the draws are at the beginning of each month!). The permanent financing for the project will come at the end of the first year from the Third Avenue Bank. You will fund the acquisition of land with your own equity.

Estimate the 12-month construction draw schedule, interest carry (for each month), ending balance at the end of each month, and the total loan amount due to the construction lender at the end of the 12-month period. What is the yield to the lender?