Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage at 80% LTV, an annual interest rate of 4.5%, with monthly compounding and monthly payments. The mortgage has a 3% prepayment penalty if the borrower prepays in the first 5 years. Suppose Ann makes the required monthly payment for 3 years and prepays after her final monthly payment at the end of 3 years. What is the annualized IRR on Ann’s mortgage

Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage at 80% LTV, an annual interest rate of 4.5%, with monthly compounding and monthly payments. The mortgage has a 3% prepayment penalty if the borrower prepays in the first 5 years. Suppose Ann makes the required monthly payment for 3 years and prepays after her final monthly payment at the end of 3 years. What is the annualized IRR on Ann’s mortgage

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 25PROB

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