Question

Given the following information, calculate the loan-to-value ratio of this commercial loan: estimated net operating income in the first year: $150,000; debt service in the first year: $100,000; loan amount: $1,000,000; purchase price: $1,300,000.

Answer 1

0.77

Step-by-step explanation:

Calculation for the loan-to-value ratio

Using this formula

Loan-to-value ratio=Loan amount/ Purchase price

Let plug in the formula

Loan-to-value ratio=1,000,000/1,300,000

Loan-to-value ratio= 0.77

Therefore the loan-to-value ratio of this commercial loan will be 0.77