1) A $20,000 loan with annual interest of 7.5% for 8 years will amount to $117,146 total. 2) A 30-year $125,000 loan with 9% interest will have monthly payments of $1,006. 3) It will take 123 months (10 years) to retire a $100,000 loan with monthly payments of $500 and annual interest of 8.75%.

1. Assignment 1 Eric Desautel
1/30/2014
1.) A payment of $20,000 with 7.5% interest at the end of each year for 8 years.
The lender should loan the real estate investor $117146
(20,000 * 1.075) + (20,000 * 1.075)^2 … (20,000 + 1.075)^8
2.) The monthly payment on this 30 year loan will be $1006
Number of payments: 360 (30*12) Interest: 9% PV: $125,000 PMT: $1006
3.) It will take 123 month or about 10 years to retire the $100,000 loan.
Interest: 8.75 PV: $100,000 PMT: 500 with 12 PMTs a year N: 123.8 months
4.) From the $200,000 of the building’s net operating cash flow, the owners must set
aside $109,668 each month in order to have money available for the capital
improvement
N: 36 Interest: 5% Future Value: $4,250,000 (monthly compounded) PMT:
109,667.97
5.) Use the constant growth perpetuity formula to estimate the apartment building's
value (per SF)
If the required annual expected total return from the investment is 12%. $7.50/(0.12
(0.01)) = $7.50/0.11 = $68.18/SF.