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A property is financed with an 85% loan-to-value ratio at 10% interest over 25 years. What...

A property is financed with an 85% loan-to-value ratio at 10% interest over 25 years. What would the BTIRRE on equity be estimated at given that the BTIRRP is 10.75%?

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Answer #1

Solution:

BTIRRE = BTIRRP + ( BTIRRP - BTIRRD) *Debt / Equity

BTIRRE = 10.75 + ( 10.75 - 10)*85/15

BTIRRE = 10.75 + 4.25

BTIRRE = 15%

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