Question: Problem 6 - 7 A builder is offering $ 1 2 7 , 5 7 4 loans for his properties at 9 percent for 2

Problem

6 - 7

A builder is offering $

127, 574

loans for his properties at

9

percent for

25

years. Monthly payments are based on current market rates of

9.5

percent and are to be fully amortized over

25

years. The property would normally sell for $

140, 000

without any special financing.

Required:

.

At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of

25

years.

.

At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after

10

years and the loan repaid?

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