In the Question Set entitled "Residential Sales and Income Approaches, Final Exam #2.

 

Question #37 reads:

 

An investment property recently transacted where the owner financed 70% of the purchase price of $300,000 via a 15-year loan at an annual interest rate of 6.75%.  What was the mortgage capitalization rate (rounded to four places)?

 

a.  0.0697

b.  0.0743

c.  0.0837

d.  0.0944

 

I do not believe there is a correct answer given for this question.  I believe the correct answer should be 0.10807.  Stephen Fenton concurs.

 

The mortgage constant and the mortgage capitalization rate are the same thing.  The formula is:

 

Mortgage Constant = Annual Debt Service divided by Original Loan Amount

 

Modified:  9/7/2009

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