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You are the Chief Underwriter of Debt Products for   Potomac Mutual Life Insurance Company. The institution’s Senior Lending Officer walks into your office and   shares the following: “I’m short on my quota of deals for this year   and my wife just told me that her BMW needs a new transmission. I’m trying to finance a 300,000 square foot   office building in Tysons Corner. The   Property will appraise at a 6.5% cap all day long. I’ve offered The Borrower two financing   alternatives, is: (a) A $36 million loan (b) For 15 years (c) With amortization predicated on a 30 year   schedule (d) At a fixed rate of interest equal to the   yield on a 10 year Treasury Bond  plus 235 basis points with payments   calculated on a monthly basis (e) With a three point fee to Potomac Mutual   Life Insurance Company is: (a) A $38.5 million loan (b) For 15 years (c) With amortization predicated on a 30 year   schedule (d) At a fixed rate of interest equal to the   yield on a 10 year Treasury Bond plus 275 basis points with payments   calculated on a monthly basis (e) With a three point fee to Potomac Mutual   Life Insurance Company” If the   NOI for 2022 is projected

to be $3,600,000 and is projected to increase 5% a   year for the foreseeable future, and, the yield on a 10 year Treasury Bond at   Closing is 2.5%: (1) What is the stated interest rate under   Alternatives A and B? Alternative A = Alternative B = (2) What is the monthly debt service payment   under Alternatives A and B? Alternative A = Alternative   B = (3) Calculate The Projected Debt Service Coverage Ratio for Calendar Years   2022 and 2023 for Alternatives A and B. DSCR Alternative A = DSCR Alternative B = (4) If you accept The Loan Officer’s valuation   premise (that The Property can be valued @ a 6.5 cap) and you compel the   Borrower to reserve $150,000 for Capital Expenditures from the Net Operating   Income on an annual basis, what is the Loan To Value for 2022 and 2023 for   Alternatives A and B? You may ignore   amortization for the purposes of calculating the LTVs. LTV Alternative A = LTV Alternative B = (5) If the   Alternative B Loan is outstanding until maturity, what is the effective   annual yield to Potomac Mutual? (6) If   The Alternative B Loan is outstanding for five years, what is the effective   annual yield to Potomac Mutual?