Question

# A business owner wants to purchase an office building of approximately 5,000 square feet. He intends...

A business owner wants to purchase an office building of approximately 5,000 square feet. He intends to occupy approximately 3,000 square feet for his home building business and to lease the remaining space in the facility. The negotiated sale price is agreed upon at \$875,000. The buyer is approved for a loan with a local bank offering the following terms:

• Loan Amount maximum of 75% of cost

• Fixed Interest Rate of 4.25%

• Monthly payments based on a 20 year amortization

• Term of the Loan is 5 years (Balloon Note)

What is the Sales Price per Square Foot for the purchase?

a. \$ 175 b. \$ 200 c. \$ 225 d. \$ 150

What is the beginning loan amount?

a. \$700,000 b. \$875,000 c. \$656,250 d. \$612,500

What is the loan payment (rounded to the nearest dollar)?

a. \$ 3,228 b. \$ 4,064 c. \$ 4,937 d. \$ 5,418

What is the principal amount that will come due at maturity after 5 years (rounded to the nearest dollar)? Hint: use the rounded payment answer to question before)

a. \$ 450,170 b. \$ 597,163 c. \$ 409,236 d. \$ 540,171

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