A property with an 10% unlevered IRR has an 70% LTV mortgage with an interest rate of 7.0% has Levered/Equity IRR of 17.0%. A new lender will charge 9.0% for an 90% LTV loan.       What is the incremental cost of borrowing on the new higher LTV loan?   Group of answer choices   15.0%   none of the choices are correct   16.0%   14.0%

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
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A property with an 10% unlevered IRR has an 70% LTV mortgage with an interest rate of 7.0% has Levered/Equity IRR of 17.0%. A new lender will charge 9.0% for an 90% LTV loan.    

 

What is the incremental cost of borrowing on the new higher LTV loan?

 

Group of answer choices

 

15.0%

 

none of the choices are correct

 

16.0%

 

14.0%

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