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6. Six years ago, an investor bought a property for $2.5 million with 10% down and...


6. Six years ago, an investor bought a property for $2.5 million with 10% down and a 20 year mortgage with an interest rate o
6. Six years ago, an investor bought a property for $2.5 million with 10% down and a 20 year mortgage with an interest rate of 5,6% a year. What were the monthly payments? 5 points Today the company sold the property and had an annual return of 10% on their investment What was the price of the property when it was sold? 5 points How much equity was in the property when it was sold? 5 points If the company had put its down payment in a savings account, what amount would they have to earn in dollars to have the same annual return as the real estate investment? 10 polets
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1- Monthly Payment =Using PMT function in MS excel Pmt(rate,nper,pv,fv,type) rate = 5.6/12 =.46666% nper =12*20 =240 pv = 2250000=fv =0 type =0 PMT(0.46666%,240,2250000,0,0) ($15,604.72)
2- Price of property Initial investment*(1+r)^n 2500000*1.1^6 4428902.5
3- balance in Loan account amount finance*(1+r)^n - monthly payment*FVAF At .46666% for 72 months 2250000*(1.00466)^72 - (15604.72*85.19478) 1815109.562
Equity in House cost of property-balance in mortgage 2500000-1815109.562 684890.44
FVAF at .46666% for 72 months (1+r)^n-1 /r (1.00466)^72- 1 / .46666% .39757/.46666% 85.1947885
4- Amount they would earn if downpayment is invested into saving account amount of down payment*(1+rate of return)^n 250000*(1.1)^6 442890.25
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