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##### [solution] » 1. You are borrowing $185,000 to purchase your new home. The

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1. You are borrowing $185,000 to purchase your new home. The**More:**

**1. You are borrowing $185,000 to purchase your new home. The mortgage offers a 5% fixed annual rate of interest and the balance is amortized over a 30-year period. You do not have to pay any points or origiantion fees, but a penalty equal to 3% of the remaining loan balance is charged if the loan is repaid in full at any time within the first five years.**

** What is the remaining balance of the loan after making payments for three years?**

**What is the total amount that must be to the lender if you pay off the remaining balance of the loan after making payments for three years?**

** If you pay off the remaining balance of the loan after making payments for three years, what is the effective cost of borrowing?**

**2. You are financing the acquisition of a small office building with a 5-year commercial loan with 6% annual interest rate and a 20-year amortization period. A. If the amount borrowed is $1,250,000 and payments are made on a monthly basis, what is the montly payment?**

**What is the balloon payment that is due when the loan matures?**

**If you must pay an origination fee of $60,000 to the lender at the time you receive the loan, what is your effective cost of borrowing? **

**3. The annual reimbursable expenses for a 25,000 square foot building come to $87,500. What is the expense reimbursement for a tenant occupying 10,000 square feet with an expense stop equal to $2.25/sf?**

**4. A retail tenant in Hoboken, NJ pays $25/sf plus overage to rent 1250 sf of space. If they earn $825,000 in total sales for the year and pay a percentage rent equal to 5% of chargeable sales as determined by their natural break point, what is the total amount of rent paid?**

**5.If a building offering 45,000 square feet of rentable space is 75% occupied, what is the annual utility expense if utilities are $2.15/sf and 40% fixed?**

**6.Note: The information presented here applies to questions 4 and 5. The law firm of Saul Goodman and Associates must choose between two different leases for their new space. The first lease, Lease A, is a 5-year gross lease with a base rent of $36.25/sf. If rents will increase by $1.00/sf each year and the cash flows from the lease are discounted at 6%, what is the corresponding effective rent when evaluated from the tenant's perspective?**

**7. The second lease, Lease B, is a 5-year net lease with a base rent of $25/sf with expenses expected to be $10/sf in the first year. If rents will increase by $1.00/sf each year and expenses by 5% a year, what is the corresponding effective rent from the tenant's perspecitive if cash flows are discounted at 6% annually?**

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This question was answered on: * Feb 21, 2020 *

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