An investment opportunity having a market price of $1,300,000 is available. Your

Question

An investment opportunity having a market price of $1,300,000 is available. Your expectation includes these: first-year gross potential income of $340,000; vacancy and collection losses equal to 10 percent of gross potential income; operating expenses equal to 45 percent of effective gross income; and capital expenditures equal to 15 percent of effective gross income. You could obtain a $1,075,000, 30-year mortgage loan requiring equal monthly payments with interest at 8.5 percent.

d. Monthly and annual payment

Explanation / Answer

Let x be the monthly Loan payment

Monthly:

0=-1075000+x/(1+0.085/12)+x/(1+0.085/12)^1+...........x/(1+0.085/12)^360

0=-1075000+x/(1+0.085/12)*(1-1/(1+0.085/12)^360)/(1-1/(1+0.085/12))

0=-1075000+x*12/0.085*(1-1/(1+0.085/12)^360)

hence, x=1075000*0.085/(12*(1-1/(1+0.085/12)^360))

x=8265.8199

Alternatively, in Excel we can use =PMT(8.5%/12,12*30,1075000)=8265.8199

So, monthly mortgage payment=$8265.8199

Annual mortgage payment=8265.8199*12=$99189.8388

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.