QUESTION 1 [The information presented here applies to questions 1 -- 5] You are

Question

QUESTION 1

[The information presented here applies to questions 1 -- 5] You are considering an investment in a small medical office building in Hackensack, NJ. The asking price for the building is $3.5M and a local commercial bank has offered to provide financing in the form of a 5-year mortgage with a 25-year amortization period. The interest rate on the mortgage is 6% and payments are made on an annual basis. If the maximum loan-to-value (LTV) ratio for the loan is 60%, what is the most the lender will provide based on this condition?

Explanation / Answer

Property Price     35,00,000 40% Self Finance (14,00,000) Principal     21,00,000 Rate of Interest 6.00% 6.000% Per Month Years 25 25 months Annual Mortgage Payment= =(2100000*6%*(1+6%)^25)/((1+6%)^25-1)    1,64,276

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