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    Unit 5 Additional Questions Lending Students

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    rojay burton
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    Unit 5 Additional Questions Lending Students

    Uploaded by

    rojay burton
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    Tutorial

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    Unit_5_Additional_Questions_lending_students_copy

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    Tutorial

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    Download as doc, pdf, or txt
    8 views2 pages

    Unit 5 Additional Questions Lending Students

    Uploaded by

    rojay burton
    Tutorial

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Unit 5 Additional Questions

    1. An apartment is generating annual income of $480,000. Vacancy loss is 15% of income,


    operating expense is 40% of income. If the market determined a capitalisation rate of
    12%; what is the value of the property using the income capitalisation approach?

    2. A house at 35 Shaw Crescent has 4 bed rooms and 3 bath rooms. The property is in a
    middle-income area of town. Recently two houses on the same road were sold for
    $3,000,000 and $3,150,000 recently. The first house sold consists of 3 bed rooms and 2
    bath rooms. The second house had 3 bed rooms and 3 bath rooms. Using the information
    given, work out the estimated value of the house at 35 Shaw Crescent.

    3. A local banker has estimated the value of a property to be $18 million using the market
    value approach $17.5 million using the cost approach and $17.9 million using the income
    approach. If the banker puts weights of 30%, 30% and 40% on the three valuation
    approaches respectively, how much loan should the manager advance if the loan to value
    ratio is 80%?

    4. A property is valued at $640,000 and is used to secure a loan. The bank’s policy is to lend
    at a loan-to-value ratio (LVR) of not more than 75%. If the current loan outstanding is
    $448,000 and a recession occurs reducing the value of the property to $560,000; how
    much will the borrower have to find to remain compliant with the bank’s policy on LVR.

    5. What is the annual payment required on a five year loan of $100,000 with interest rate
    of 12%.

    a) Construct a loan amortization schedule for the five years.


    b) What is the repayment amount on the loan if calculated monthly.

    6. Jamie and Jake each recently bought a different new car. Both received a loan from a
    local bank. Both loans have a nominal interest rate of 12 percent with payments made at
    the end of each month, are fully amortizing, and have the same monthly payment.
    Jamie’s loan is for $15,000; however, his loan matures at the end of 4 years (48 months),
    while Jake’s loan matures in 5 years (60 months). After 48 months Jamie’s loan will be
    paid off. At the end of 48 months what will be the remaining balance on Jake’s loan?

    7. Steaks Galore needs to arrange financing for its expansion program. One bank offers to
    lend the required $1,000,000 on a loan that requires interest to be paid at the end of each
    quarter. The quoted rate is 10 percent, and the principal must be repaid at the end of the
    year. A second lender offers 9 percent, daily compounding (365-day year), with interest
    and principal due at the end of the year. What is the difference in the effective annual rates
    (EFF%) charged by the two banks?

    8. Victoria and David have a 30-year, $75,000 mortgage with an 8 percent nominal annual
    interest rate. All payments are due at the end of the month.
    a) What percentage of their monthly payments the first year will go towards interest
    payments?
    b) If Victoria and David were able to refinance their mortgage and replace it with a 7
    percent nominal annual interest rate, how much (in dollars) would their monthly payment
    decline?

    9 When you purchased your house, you took out a 30-year annual-payment mortgage with
    an interest rate of 6% per year. The annual payment on the mortgage is $12,000. You
    have just made a payment and have now decided to pay the mortgage off by repaying the
    outstanding balance. What is the payoff amount if
    a. You have lived in the house for 12 years (so there are 18 years left on the mortgage)?
    b. You have lived in the house for 20 years (so there are 10 years left on the mortgage)?
    c. You have lived in the house for 12 years (so there are 18 years left on the mortgage)
    and you decide to pay off the mortgage immediately before the twelfth payment is
    due?

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