The market rate of interest on the loan

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Reference no: EM131521122

A home builder is offering OMR 175,000 loans for homes at 10% for 25 years (monthly payments) . Current market rates are 10.5% for 25-year loans. The home would normally sell for OMR 185,000 without any special financing.

1- At what price should the builder sell the homes to earn , in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years.

2- How would your answer to part 1 change if the home is resold after 10 years and the loan is repaid?

Reference no: EM131521122

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