John bought a house for $1m and rent it for $3,000 net a month or $36,000 a year. He arranges for a 5-year balloon loan (T = 5) with a 30-year repayment period (i.e. n = 30). Interest rate =5%. At the end of 5 years, he intends to sell the house for $1.2m (net of transaction cost) and use the proceeds to repay the balloon loan

Compute his profit or loss at the end of 5 years.

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To compute Johns profit or loss at the end of 5 years we need to calculate the cash flows associated ... View the full answer