The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $982,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use

The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $982,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use

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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A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rate of 6%. How much should an investor be willing to pay for this property? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
Derek decides to buy a new car. The dealership offers him a choice of paying $518.00 per month for 5 years (with the first payment due next month) or paying some $28,412.00 today. He can borrow money from his bank to buy the car. What interest rate makes him indifferent between the two options? Submit
The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for four years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) (d): If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points…
You want to investigate whether it will make financial sense for your business to purchase some real estate. Find a commercial property that is for sale in Charlotte, NC that your business could use (purchase price must be at least $20,000). Include the URL that will take the class to the webpage for the property. You will finance 80% of the purchase price; you will put 20% down on the purchase. Using 5% as the interest on your 30-year fixed rate mortgage, calculate the monthly payment. Next, calculate the payment using the same 5%, but for a 15-year mortgage. Show all steps in your calculations in your post. In a summary paragraph, discuss the results of your calculations and what you think is the best decision for your business to make regarding purchasing the property. Include these items in your post: URL link to property Calculation of 30-year monthly payment Calculation of 15-year monthly payment Steps in calculations (Excel is recommended) Summary
David is interested in a rental apartment that would supply him with $60,000 at the end of year 1, $65,000 at the end of year 2, $59,000 at the end of year 3, $63,000 at the end of year 4, and $61,000 at the end of year 5. Also, he will sell the apartment for $1m at the end of year 5. • How much should David pay for this investment if he wants to earn 10 percent on his investment? • If the acquisition costs are $800,000, would David buy this apartment? What is IRR? PV of Time of cash flow Cash flow cash flow, 10% 1 4. Total: 2.
I need the answer of the question attached. Please provide all possible answers. Thank you!
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely.
You are interested in purchasing an automobile but you require financing. The dealer has provided you with several loan options to finance the purchase. Your market rate of return for the risk that you pose various lenders is 7%. The automobile that you want to purchase has a sticker price of $35,000 and a competitive market value of $31,000. Here are your loan options: Loan 1: loan has a term of 60 months, a contractual rate of interest of 8% and requires a down payment of $1,500 for the purchase of the car. The loan allows you to claim a rebate of $1,000 on the car at purchase. Loan 2: The loan has a term of 72 months, a contractual rate of 7.5% and requires a down payment of $1,000 for the purchase of the car. The loan allows you to claim a $500 rebate. Loan 3: The loan has a term of 36 months a contractual interest rate of 0% and requires $4,000 down. No rebate is available for this option. What is the value created or value destroyed for Loan 3 (round to the nearest…
The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $986,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) I want to know how to find this out: If Darrell chooses the 4-point 9% loan, what will be his…
Please show how to solve this using excel and please show all formulas in the spreadsheet please!! Thomas decides to buy a house with price of $450,000. Thomas puts 20% down payment and considers a 30-year fixed rate mortgage to pay the remaining balance. The lender offers Thomas two choices of the mortgage with monthly payments shown in the table as choice 1 and choice 2, assume that the origination cost is $6,000. A. If you hold the loan for 30 years, what is the effective cost for each choice? B. How about the effective cost for each choice if the loan will only be outstanding for 5 years (60 months) (i.e. the borrow will pay off the loan at the end of 60 months)?
Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $26,500, and Harold expects to spend about $500 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,500. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,480 per year, including maintenance. Assume a discount rate of 10 percent. Required: Calculate the net present value of Harold’s options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Advise Harold about which option he should choose.
You are planning to purchase a house that will require a mortgage of $300,000. You find 2 mortgage offers both at the same rate of 2.5%. One is a 30-year mortgage and the other is a 20-year mortgage. You know, without any computation, that the 30-year mortgage will have lower monthly payments than the 20- year mortgage since the rates are the same. A friend advised that before taking the 30-year mortgage offer, you do some mathematical calculations to see if your budget can handle the extra amount of monthly payment for the 20-year mortgage. Answer the following questions based on the given information: 1. How much more money would you have to budget per month to make the monthly payments on the 20- year mortgage instead of the 30-year mortgage? 2. You ask your friend what advantage there is to be paying more per month on the 20-year mortgage. Your friend replies that it is all about total interest. What is the difference between the total interest on each mortgage? Assume that you…

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