An investor has $300,000 to invest as equity in a project requiring $1,400,000 in total cost/investment....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An investor has $300,000 to invest as equity in a project requiring $1,400,000 in total cost/investment. She can either: A) obtain a conventional $1,100,000 mortgage loan at 9.50% amortizing with level monthly payments for 20 years, or: B) obtain a conventional $900,000 (first lien) mortgage loan at 9.00% 20 years and a second mortgage loan of $200,000 at 13.00% for 20 years, both amortizing with level monthly payments. 1. What is the difference between 1st lien and 2nd lien position? 2. Describe the additional risk assumed by a lender in the 2nd (or subordinate) lien position. 3. Which alternative is better for the borrower/investor assuming she keeps the property (and financing) for 20 years, and why? 4. Which alternative is better for the borrower/investor assuming she keeps the property (and financing) for 5 years only, and why? An investor has $300,000 to invest as equity in a project requiring $1,400,000 in total cost/investment. She can either: A) obtain a conventional $1,100,000 mortgage loan at 9.50% amortizing with level monthly payments for 20 years, or: B) obtain a conventional $900,000 (first lien) mortgage loan at 9.00% 20 years and a second mortgage loan of $200,000 at 13.00% for 20 years, both amortizing with level monthly payments. 1. What is the difference between 1st lien and 2nd lien position? 2. Describe the additional risk assumed by a lender in the 2nd (or subordinate) lien position. 3. Which alternative is better for the borrower/investor assuming she keeps the property (and financing) for 20 years, and why? 4. Which alternative is better for the borrower/investor assuming she keeps the property (and financing) for 5 years only, and why?
Expert Answer:
Answer rating: 100% (QA)
1A first lien mortgage is a loan that has priority over all other liens or claims on a property This means that in the event of a foreclosure the lend... View the full answer
Related Book For
Research Methods For Business Students
ISBN: 9781292208787
8th Edition
Authors: Mark Saunders, Philip Lewis, Adrian Thornhill
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
a. Stock market index information: S&P 500 (stock) index level: Nasdaq Composite (stock) index level: b. Interest rate information : Prime rate: Federal funds rate: Commercial paper rate (90 days):...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Earnhart Corporation has outstanding 3,000,000 shares of common stock with a par value of $10 each. The balance in its Retained Earnings account at January 1, 2020, was $24,000,000, and it then had...
-
If physical OIDs are used, an object can be relocated by keeping a forwarding pointer to its new location. In case an object gets forwarded multiple times, what would be the effect on retrieval...
-
Examine the process activities and transactions for the financial management process shown in Figure 13-6. a. Using the example transactions listed in the same figure, describe which transactions or...
-
Presented here is information for Telco, Inc., for the year ended December 31,2010. Requirements 1. What is the beginning stockholders equity of Telco, Inc.? 2. What is the ending stockholders equity...
-
Niner Bikes, as discussed in the chapter opener, uses a costing system with standard costs for direct materials, direct labor, and overhead costs. Two comments frequently are mentioned in relation to...
-
Fun in the Sun Incorporated operates a beach chair rental service in south Florida. The company experienced the following events in its first year of operations: 1. Issued $102,000 of common stock...
-
The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of...
-
Think back to a team building exercise that you have participated in. It might be a sport, competition or escape room. It might also be a manager that takes the team out for lunch. In many cases,...
-
Identify any barriers to successfully implementing the best practice or process. In addition to the obvious, this could also include such matters as stakeholder conflict over what project management...
-
A chicken egg (m = 50g) and an ostrich egg (m = 3kg) were putinto the boiling water at the same time, and the chicken egg was hardboiled after 5 min. How longwill it take for the ostrich egg to be...
-
Q6 (a) Discuss the continuity of the following function at x=2 x-4 f(x)=2 x-2 when 0 < x <2 when x = 2 3x+2 when x> 2 X (b) Find lime when xa from the left hand side as well as from the right 04-1...
-
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs...
-
2) A short range rocket is launched, and its height (in feet) above sea level t seconds after launch is given by the following function: h(t) = -4.9t + 1500t + 570. a) At what time (rounded to the...
-
Can you implement merge sort without recursion? Explain your answer. Why is the time complexity of a merge sort always O(n log n)?
-
On October 1, 2014, the Dow Jones Industrial Average (DJIA) opened at 17,042 points. During that day it lost 237 points. On October 2 it lost 4 points. On October 3 it gained 209 points. Deter-mine...
-
Derivatives are contracts that derive their value from the performance of other, more basic, underlying variables, which are generally but not limited to financial assets or rates (Hull, 2015). They...
-
How would you demonstrate the influence of relevant theory in your research proposal?
-
a. Illustrate the data from the Park Trading Companys audited annual accounts (Question 12.1) to show trends in income and expenditure. b. What does your diagram emphasise? c. What diagram would you...
-
Think of an SoS problem of interest. With the help of the example provided in this chapter ,try to fill a ROPE table for the specific problem. Do not focus only on the Resources (component...
-
Dura Corporation makes metal frames for several world brands of portable home generators. They sell the frames to a wide variety of portable generator manufacturers such as DeWalt, DuroMax, Generac,...
-
Jake and Lilly Gifford founded J&L Packaging, Inc. (J&LP) in 1995 after graduating from the University of Cincinnati. Jake earned a degree in robotics and mechanical engineering, while Lilly...
Study smarter with the SolutionInn App