Question

In: Finance

Assume an appraiser has been hired to appraise a local college. His best estimate of the...

Assume an appraiser has been hired to appraise a local college. His best estimate of the reproduction cost of the building is $4,000,000 Yet upon the evaluating the use of the land, the appraiser have deemed the valuse of the site to be worth $1,100,000. If the building has depreciated by $800,000 over its lifetime and there are no further depreciated losses due to external or financial obsolescence, what is hte market value of the college using the cost approach. Ans: $4,300,000

Joel Barish is considering to purchase a new apartment in Rockville Center, NY using a 30 year mortgage that would cost him $378,000 with an interest rate of 7.2%. Suppose the lender of the mortgage loan requres 2.5% in closing costs, what would be the APR of this loan?  Ans: 7.4558%

Clementine Kruczynski is considering to borrow $250,000 through a 15 year 1/1 hybrid adjustable rate morgage to purchase a single- family home. The loan has a teaser rate of 5.52%. After the 12th payment, the loan adjusts annually to 275 basis point above the current 1 year LIBOR rate which is 3.13%. The mortgage is fully amortized and mortgage payments are made at the end of each month until maturity. Determine the size of the 13th payment that is attributed to interest repayment. Ans: $1,170.11

PLEASE SHOW ME HOW TO GET THE BOLDED ANSWERS

Solutions

Expert Solution

1.

In cost approach appraisal, the market price for the property is equal to the cost of land plus cost of construction, less depreciation.

SO MARKET VALUE OF COLLEGE = 1100,000 + 4000,000 - 800,000 =4300,000

2.  

STEP 1 CALCULATE AMOUNT OF INSTALMENT
LOAN 378000
RATE 7.20%
YEAR 30
PMT 31075.94 INSTALMENT
STEP 2 NOW
LOAN 378000
CHARGES 9450 (2.5% OF LOAN)
EFFECTIVE LOAN 368550
AMOUNT
NOW USE THE ABOVE LOAN AMOUNT WITH INSTALMENT
CALCULATED EARLIER , FIND RATE
RATE 7.45729% APR
3.
LOAN 250000.00
RATE 5.52%
15.00
INSTALMENT 2045.36
AFTER 12TH PAYMENT THE RATE = 2.75% + 3.13% = 5.88%
amortization schedule
A B C A*5.52%
loan instalment principle interest OUTSTANDING LOAN
1 250000.00 2045.36 895.36 1150.00 249104.64
2 249104.64 2045.36 899.48 1145.88 248205.16
3 248205.16 2045.36 903.62 1141.74 247301.54
4 247301.54 2045.36 907.78 1137.59 246393.76
5 246393.76 2045.36 911.95 1133.41 245481.81
6 245481.81 2045.36 916.15 1129.22 244565.66
7 244565.66 2045.36 920.36 1125.00 243645.30
8 243645.30 2045.36 924.59 1120.77 242720.71
9 242720.71 2045.36 928.85 1116.52 241791.86
10 241791.86 2045.36 933.12 1112.24 240858.74
11 240858.74 2045.36 937.41 1107.95 239921.33
12 239921.33 2045.36 941.72 1103.64 238979.60
13 238979.60 2045.36 874.36 1171.00 238105.24
(238979.60*5.88%/12)
(THIS IS HOW TO GET THE SUM)

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