A foreign investor borrowed $36 million for the acquisition of a 180,000 square foot shopping center...

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Finance

A foreign investor borrowed $36 million for the acquisition of a180,000 square foot shopping center in Boulder, Colorado at apurchase price of $54 million. The mortgage loan was a 30-yearfully amortizing fixed rate loan at a stated annual interest rateof 5% payable monthly and the borrower was charged 2 points by thelender at closing.
What was the effective annual interest rate on the loan if theloan was carried to maturity?
What was the effective annual interest rate on the loan if theprincipal balance was fully repaid at the end of 10 years?

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3.7 Ratings (508 Votes)

All fianncials below are in mn Payment frequency is monthly Hence one period is one month We will use the RATE function to calculate the effective rate per period We will then convert See Answer

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A foreign investor borrowed $36 million for the acquisition of a180,000 square foot shopping center in Boulder, Colorado at apurchase price of $54 million. The mortgage loan was a 30-yearfully amortizing fixed rate loan at a stated annual interest rateof 5% payable monthly and the borrower was charged 2 points by thelender at closing.What was the effective annual interest rate on the loan if theloan was carried to maturity?What was the effective annual interest rate on the loan if theprincipal balance was fully repaid at the end of 10 years?