Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?
Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?
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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Transcribed Image Text:A builder is offering $129,564 loans for his properties at 9 percent for 25 years. Monthly payments
are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The
property would normally sell for $140,000 without any special financing.
Required:
a. At what price should the builder sell the properties to earn, in effect, the market rate of interest
on the loan? Assume that the buyer would have the loan for the entire term of 25 years.
b. At what price should the builder sell the properties to earn, in effect, the market rate of interest
on the loan if the property is resold after 10 years and the loan repaid?
× Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required A
Required B
At what price should the builder sell the properties to earn, in effect, the market rate of interest on the lo
buyer would have the loan for the entire term of 25 years. (Do not round intermediate calculations. Roun
the nearest whole dollar amount.)
Sale value
$ 1,252,672 ×
< Required A
Required B
>
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