You work for an investment banking firm which warehouses (i.e., buys or funds) commercial mortgage loans and
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Question:
This loan is representative of other loans in the pool. For purposes of this problem, make two simplifying assumptions: ignore monthly compounding (i.e., assume the annual compounding of interest) and treat the mortgage loans as if they are interest-only instruments (i.e., assume there is no principal amortization). A. Your firm wants to earn, upon the sale of the CMBS offering, a placement fee which has a present value equal to 2.0% of the placement (or loan) amount. For purposes of this computation, assume that the investment bank's cost of capital is 7.5%. As a representative loan, compute the annual fee (in dollars) that must be paid on the $50 million loan such that the desired fee is earned.
How large is this annual fee as a percentage of the ($50 million) loan?
Related Book For
Accounting for Governmental and Nonprofit Entities
ISBN: 978-0078110931
16th Edition
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
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