A piece of land can be purchased today for $200,000. If the investor can lease the land as a hunting preserve for annual rent that will pay all real estate taxes and insurance, should the investor take out a $160,000 loan at 12% to purchase the land? The investor predicts that she can sell the land in 10 years for triple the purchase price, at which time she will have to pay off the principal and interest ($496,936) on the loan.

Is this a favorable spread?

Answer rating: 100% (QA)

To determine if this is a favorable spread we need to calculate the net gain or loss for the investo... View the full answer