1) You purchase a $450,000 town home and you pay 20 percent down.

You obtain a 30-year fixed-rate mortgage

with an annual interest rate of 6.5 percent. After five years you refinance the mortgage for 25 years at a 5.75
percent annual interest rate. After you refinance, what is the new monthly payment (to the nearest dollar)?

2) A borrower took out a 30-year fixed-rate mortgage of $2,500,000 at a 6.2 percent annual rate. After five
years, he wishes to pay off the remaining balance. Interest rates have by then fallen to 5.7 percent. How much
interest did he pay over 5 years of the mortgage (to the nearest dollar)?

3) A homeowner can obtain on property valued at $250,000, a 30-year fixed-rate mortgage, LTV=90%, at a rate
of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. If she will keep the mortgage for 30
years, what is the net present value of paying the points (to the nearest dollar)?

4) A homeowner can obtain a $350,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or
at a rate of 5.5 percent with 2.5 points. How long must the owner stay in the house to make it worthwhile to
pay the points if the payment savings are invested monthly?

5) Calculate the before-tax equity reversion (BTER): NOI: $89,100; annual debt service: $58,444; net sale
proceeds: $874,700; remaining mortgage balance: $631,026.

6) Calculate the appropriate after-tax discount rate: tax rate on comparable risk investment: 35%; investor's
before-tax opportunity cost: 15%; capitalization rate: 8%.

7) Given the following information, calculate the going-out cap rate: estimated holding period: five years; NOI
for year 1: $120,000; NOI for year 5: $150,000; NOI for year 6: $155,250; expected sale price at end of year 5:
$1,530,000.

8) A client has requested advice on a potential investment opportunity involving an income-producing property.
She would like you to determine the internal rate of return of the investment opportunity based on the following
information: expected holding period: years; end of first year NOI estimate: $110,000; NOI estimates in
subsequent years will grow by 6 % per year; price at which the property is expected to be sold at the end of year
5: $1,615,205.22; current market price of the property: $1,475,667.71.

9) Given the following information regarding an income producing property, determine the NPV using levered
cash flows in your analysis: required equity investment: $350,000; expected NOI for each of the next five years:
$250,000; debt service for each of the next five years: $175,000; expected holding period: five years; required
yield on levered cash flows: 15%; expected sale price at end of year 5: $2,500,000; expected cost of sale:
$250,000; expected mortgage balance at time of sale: $1,750,000.

10) Given the following information regarding an income producing property, determine the unlevered internal
rate of return (IRR): expected holding period: five years; 1st year expected NOI: $89,100; 2nd year expected
NOI: $91,773; 3rd year expected NOI: $94,526; 4th year expected NOI: $97,362; 5th year expected NOI:
$100,283; debt service in each of the next five years: $58,444; current market value: $858,000; required equity
investment: $221,250; net sale proceeds of property at end of year 5: $947,700; remaining mortgage balance at
end of year 5: $631,026.