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Please answer correctly ! All info should be enough to answer...

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Finance

Please answer correctly !
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All info should be enough to answer question.
A property is expected to have NOl of $120,000 the first year. The NOl is expected to increase by 5 percent per year thereafter. The appraised value of the property is currently $1.25 million and the lender is willing to make a $1,135,000 participation loan with a contract interest rate of 5.5 percent. The loon wil be amortized with monthly payments over a 20 -year term. In addition to the regular martgage payments, the lender will receive 50 percent of the NOl in excess of $120,000 each year until the loan is repaid. The lender also will receive 50 percent of any increase in the value of the property. The loan includes a substantial prepayment penaity for repayment before year 5 , and the balance of the loan is due in year 10 . (ff the property has not been sold, the participotion will be bosed on the appraised value of the property) Assume that the appraiser would estimate the value in year 10 by dividing the NOIfor year 11 by an 9 percent capitalizotion rate: Required: expected return to the lender) (Do not round intermediate calculations. Round your finat answer to 2 decimal places.)

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