Question

Your firm hass taken out a 5534,000 loan with 3.3% APR (compounded monthly) for some commercial property As is common in commercial real entate, the loan is a 5 -year loan based an a 15 -year amortization. This meens that your loan payments wil be calculated as if you will take 15 years to pay off the loan, but you actually mant do so in 5 years. To do this, you will make 59 equal payments based on the 15 -year amorizatien schedule and then make a final 60 th payment to gay the remaining balance. (Note. Be carefill not lo round any intermediate steps less than six decimal places.) a. What will your monthly payments be? b. What will your final payment be? a. What wil your monthly payments be? The monahly payments wat be 1 (Round to the nearast cont)

Answer 1

a. Monthly payments: $40,305.49

b. Final payment: $521,503.95 becauseThe monthly payments are $40,305.49, and the final payment is $521,503.95, with the 5-year commercial property loan structured on a 15-year amortization, making 59 equal payments followed by a final payment covering the remaining balance.

Step-by-step explanation:

The monthly payments for the commercial property loan are calculated using the formula for a fixed-rate mortgage payment, which considers the loan amount, annual interest rate, and the loan term. In this case, with a loan amount of $534,000 and an annual interest rate of 3.3% compounded monthly, the monthly payment is $40,305.49.

The final payment is calculated based on the remaining balance after 59 equal monthly payments. The loan is structured as a 15-year amortization, but it will be paid off in 5 years. After the 59th payment, there is still a remaining balance on the loan. The final payment of $521,503.95 covers this remaining balance, ensuring the loan is fully paid off at the end of the 5-year term.

This approach allows for smaller monthly payments over the 5-year period, making it more manageable for the borrower. The final payment is higher because it includes the remaining balance that wasn't covered by the regular monthly payments. This structure aligns with the typical financing arrangements in commercial real estate, where borrowers often opt for longer amortization periods but aim to pay off the loan sooner.