A property is financed with an 85% loan-to-value ratio at 10% interest over 25 years.What would the BTIRR_E on equity be estimated at,given that the BTIRR_p is 10.75%? A)10.1% B)10.4% C)15.0% D)13.2%

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Quizplus · Accepted Answer

The BTIRR on equity (BTIRR_E) is generally higher than the BTIRR on the property (BTIRR_p) due to the leverage effect. Given the high loan-to-value ratio and the BTIRR_p of 10.75%, the BTIRR_E would be significantly higher, making 15.0% a reasonable estimate.

A Property Is Financed with an 85% Loan-To-Value Ratio at 10