What will the loan balance after making the annual payment

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Reference no: EM133664194

Problem

You want to purchase a $1,000,000, 8% cap rate property. The tenant has a long (100 years) lease with fixed rent (i.e., g = 0).

A lender will lend you $800,000 as a 10-year balloon loan at a 6% annual interest rate (annual payments). However, the lender requires that the entire cash flow from the property ($80,000) be used toward principal and interest payments.

Assume that rent and interest payments are made at the end of the year.

What will be the loan balance ($) after making 10 annual payments of $80,000?

Reference no: EM133664194

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