Main answer:
A. The amount that can be borrowed is 75% of the property's market value, which is $200,000. Therefore, the amount that can be borrowed is 75% of $200,000.
B. The annual debt service is the total amount of money that needs to be paid each year to cover the loan. To calculate this, we need to find the monthly payment and then multiply it by 12 to get the annual payment.
First, we need to calculate the monthly payment using the loan terms. We have an 8% interest rate and a 20-year amortization. The formula to calculate the monthly payment is:
Monthly Payment = Loan Amount * Monthly Interest Rate / (1 - (1 + Monthly Interest Rate) ^ (- Number of Months))
Let's plug in the values:
Loan Amount = 75% of $200,000
Monthly Interest Rate = 8% / 12 (convert annual interest rate to monthly)
Number of Months = 20 * 12 (convert years to months)
By substituting the values and calculating, we can find the monthly payment.
Once we have the monthly payment, we can multiply it by 12 to get the annual debt service.
C. The expected annual loan constant is the ratio of the annual debt service to the loan amount. To calculate this, we can divide the annual debt service by the loan amount.
Step-by-step explanation:
A. To calculate the amount that can be borrowed, we multiply the property's market value ($200,000) by the loan percentage (75%). This gives us the loan amount that can be borrowed.
B. To find the annual debt service, we first need to calculate the monthly payment using the loan terms. We use the formula for loan amortization to find the monthly payment. Then, we multiply the monthly payment by 12 to get the annual debt service.
C. The expected annual loan constant is found by dividing the annual debt service by the loan amount. This ratio helps determine the stability of the loan repayment over time.
Please note that the calculations provided in this answer are based on the information given in the question. It's important to consult with a financial advisor or lender for precise calculations and to understand the specific terms and conditions of the loan.