9. Suppose that you just borrowed $250,000 in the form of a 15-year loan with an
ID: 2722433 • Letter: 9
Question
9. Suppose that you just borrowed $250,000 in the form of a 15-year loan with an annual interest rate of 3.5% with monthly payments and monthly compounding. How much interest will you pay in the 11th year of the loan?
10. Suppose that you just borrowed $250,000 in the form of a 30-year loan with an annual interest rate of 12% with monthly payments and monthly compounding. How much interest will you pay in the 1st year of the loan?
11. Suppose that you are considering the purchase of an office building as a real estate investment. You believe that the purchase price of the property would be $11.5 million and that you would be able to finance the purchase with a 25-year loan for 70% of the purchase price with an annual interest rate of 5% with monthly payments and compounding. Use the information below to calculate the year 1 debt-coverage ratio for this property.
Year 1 Potential Gross Income: $1.4 million
Year 1 Effective Gross Income: $1.2 million
Year 1 Net Operating Income: $700,000
Please show how to solve using a BA II plus calculator
Explanation / Answer
Ans (a) Loan Amount 250000 Interest Rate 3.5% Monthly interest 0.002916667 Monthly Payment ($1,787.21) Intt will be paid $ 3,169.89 in the 11th year Loan Amortization Table Ans (b) Loan Amount 250000 Interest Rate 12.0% Monthly interest 0.01 Monthly Payment ($2,571.53) Intt will be paid $ 29,951.18 in the 1st year Loan Amortization Table Period Principal Interest Payment Balance 0 $ 250,000.00 1 $ 71.53 $ 2,500.00 $ 2,571.53 $ 249,928.47 2 $ 72.25 $ 2,499.28 $ 2,571.53 $ 249,856.22 3 $ 72.97 $ 2,498.56 $ 2,571.53 $ 249,783.25 4 $ 73.70 $ 2,497.83 $2,571.53 $ 249,709.55 5 $ 74.44 $ 2,497.10 $2,571.53 $ 249,635.12 6 $ 75.18 $ 2,496.35 $2,571.53 $ 249,559.94 7 $ 75.93 $ 2,495.60 $2,571.53 $ 249,484.01 8 $ 76.69 $ 2,494.84 $2,571.53 $ 249,407.31 9 $ 77.46 $ 2,494.07 $2,571.53 $ 249,329.86 10 $ 78.23 $ 2,493.30 $2,571.53 $ 249,251.62 11 $ 79.02 $ 2,492.52 $2,571.53 $ 249,172.61 12 $ 79.81 $ 2,491.73 $2,571.53 $ 249,092.80 Total Interest $ 29,951.18 Ans (b) Loan Amount 8050000 Interest Rate 5.0% Monthly interest 0.004166667 Monthly Payment ($47,059.50) Intt will be paid $ 398,730.48 in the 1st year Loan Amortization Table Period Principal Interest Payment Balance 0 $ 8,050,000.00 1 $ 13,517.83 $ 33,541.67 $ 47,059.50 $ 8,036,482.17 2 $ 13,574.16 $ 33,485.34 $ 47,059.50 $ 8,022,908.01 3 $ 13,630.71 $ 33,428.78 $47,059.50 $ 8,009,277.30 4 $ 13,687.51 $ 33,371.99 $47,059.50 $ 7,995,589.79 5 $ 13,744.54 $ 33,314.96 $47,059.50 $ 7,981,845.25 6 $ 13,801.81 $ 33,257.69 $47,059.50 $ 7,968,043.44 7 $ 13,859.32 $ 33,200.18 $47,059.50 $ 7,954,184.12 8 $ 13,917.06 $ 33,142.43 $47,059.50 $ 7,940,267.06 9 $ 13,975.05 $ 33,084.45 $47,059.50 $ 7,926,292.00 10 $ 14,033.28 $ 33,026.22 $47,059.50 $ 7,912,258.72 11 $ 14,091.75 $ 32,967.74 $47,059.50 $ 7,898,166.97 12 $ 14,150.47 $ 32,909.03 $47,059.50 $ 7,884,016.50 Total Interest $ 165,983.50 $ 398,730.48 $ 564,713.98 Debt Coverage Ratio= Net Oprating Income/Debt 1.24
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