You are considering three loan proposals to finance the purchase of investment property. The purchase price...

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You are considering three loan proposals to finance the purchase of investment property. The purchase price is RM500,000 and the expected net operating income is RM60,000. The alternatives are: i. Loan-to-value ratio is 90 percent, interest rate is 9 percent, and terms are 25 years, level amortising with monthly payments. Loan-to-value ratio is 80 percent, interest is 8 percent, and terms are 25 years, level amortising with monthly payments. ii. iii. Loan-to-value ratio is 80 percent, interest is 7.5 percent + three points, and terms are 25 years, fully amortising with monthly payments. (a) Determine the effective interest rate for each loan, assuming the loan is outstanding for the full 25-year amortisation term. (b) Suggest the most favourable loan alternative to investor's financial position. You are considering three loan proposals to finance the purchase of investment property. The purchase price is RM500,000 and the expected net operating income is RM60,000. The alternatives are: i. Loan-to-value ratio is 90 percent, interest rate is 9 percent, and terms are 25 years, level amortising with monthly payments. Loan-to-value ratio is 80 percent, interest is 8 percent, and terms are 25 years, level amortising with monthly payments. ii. iii. Loan-to-value ratio is 80 percent, interest is 7.5 percent + three points, and terms are 25 years, fully amortising with monthly payments. (a) Determine the effective interest rate for each loan, assuming the loan is outstanding for the full 25-year amortisation term. (b) Suggest the most favourable loan alternative to investor's financial position.

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a Effective Interest Rate for Each Loan Lets calculate the effective interest rate for each loan usi... View the full answer