A property is available for sale that could normally be financed with a fully amortizing $81,200 loan at a 10 percent rate with monthlypayments over a 25-year term. Payments would be $737.87 per month. The builder is offering buyers a mortgage that reduces thepayments by 50 percent for the first year and 25 percent for the second year. After the second year, regular monthly payments of$737.87 would be made for the remainder of the loan term.Required:a. How much would you expect the builder to have to give the bank to buy down the payments as indicated?b. Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have thebuydown available?Complete this question by entering your answers in the tabs below.Required A Required BHow much would you expect the builder to have to give the bank to buy down the payments as indicated? (Do not roundintermediate calculations. Round your final answer to 2 decimal places.)Down paymentRequired B >

Loan Amortization: Amortized loan refers to a certain loan type where the borrower makes scheduled…

Answered: A property is available for sale that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have a choice between the following two identical properties: Property A is priced at $150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully amortizing. a. With no preference other than financing, which property would you choose? b. How would your answer change if the seller of Property B provided a second mortgage for $20,000 at the same 9 percent rate as the assumable loan? c. How would your answer change if the seller of Property B provided a second mortgage for $30,000 at the same 9 percent rate as the assumable loan so that no additional down payment would be required by the buyer if the loan were assumed?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.50 million. The property is projected to produce a first year NOI of $140,000. 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 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period? Complete this question by entering your answers in the tabs below. Required A Required B What will the balloon payment be at the end of the fifth year? (Do not round…
A $190,000 mortgage is to be amortized by making monthly payments for 20 years. Interest is 6.5% compounded semi-annually for a 3-year term. If the mortgage is renewed for a 5-year term at 7.25% compounded semi-annually, what is the size of the monthly payment for the renewal term?
A firm purchases 100 acres of land for $200,000 and agrees to remit 20 equal annual end-of-year installments of $41,067 each. What is the true annual interest rate on this loan?
Island News purchased a piece of property for $1.82 million. The firm paid a down payment of 20 percent in cash and financed the balance. The loan terms require monthly payments for 20 years at an APR of 4.00 percent, compounded monthly. What is the amount of each mortgage payment?
A property owner has set up a contract in which he agrees to sell a warehouse 5 years from now to the tenant who currently leases the space. The tenant has agreed to continue to pay $20,000 in rent at the end of each year, including year five, at which time he will purchase the building for an additional $1,500,000. Assuming the required rate of return on a similar investment is 10% (annual), how much is this deal presently worth to the original owner of the property? $1,014,779.2 $1,007,197.20 $2,281,452.80 $2,293,663.00
After two years in business, the owners have saved (have a surplus of) $123,750.00. They must decide if they will invest in property or investment bonds. If they invest in a property and a vehicle, the total cost will be $445,500,00, of which $123,750.00 will be required as a down payment. The fixed interest rate on the mortgaged amount is 5.40% compounded semi-annually for a term of 13 years. 5. What is the size of the semi-annual payments required to settle this mortgage? 6. What is the size of the final payment? 7. How long would it take (in months) to settle this loan with regular monthly payments of exactly $2000 instead of the PMT value calculated in Part 5?
Subject: Financial strategy & policy 1) A leasing contract calls for an immediate payment of $100,000 and nine subsequent $100,000 semiannual payments at six month intervals. What is the PV of these payments if the annual discount rate is 8 percent? 2) Siegefried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8 percent, what income can Mr. Basset to receive each year?
prepare an amortization schedule showing the first four payments for each loan. Large semitrailer trucks cost $110,000 each. Ace Trucking buys such a truck and agrees to pay for it by a loan that will be amortized with 9 semiannual payments at 8% compounded semiannually.
A new home was purchased in Niagara Fall’s Butler Heights subdivision for $375,000 by Karen. The house is going to be financed by making a down payment of 15% and financing the balance with a conventional mortgage. The mortgage is to be amortized over 20 years with weekly payments. The rate chosen for the first four years of the mortgage is 2.79% compounded semi-annually. Show all work with formulas a) Determine the size of the weekly payments? b) What will the outstanding balance be after the first four years? c) Determine the size of the new weekly payment if after the first four year term she renews the mortgage using a fixed rate of 2.04% compounded semi-annually.

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