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If you, as a lender, know the yield on the entire transaction, and you wish
to obtain the payment amount on the wrap-around mortgage to achieve
this yield, use the following procedure. Once the monthly payment is
known, the borrower's periodic interest rate may also be determined.
1. Press the and press CLEAR .
2. Key in the remaining periods of the original mortgage and press .
3. Key in the desired annual yield and press .
4. Key in the monthly payment to be made by the lender on the original
mortgage and press .
5. Press .
6. Key in the net amount of cash advanced and press .
7. Key in the total term of the wrap-around mortgage and press .
8. If a balloon payment exists, key it in and press .
9. Press to obtain the payment amount necessary to achieve the
desired yield.
10. Key in the amount of the wrap-around mortgage and press
to obtain the borrower's periodic interest rate.
Example 3: Your firm has determined that the yield on a wrap-around
mortgage should be 12% annually. In the previous example, what monthly
payment must be received to achieve this yield on a $200,000 wrap-
around? What interest rate is the borrower paying?
Keystrokes Display
CLEAR
200 12
Number of periods and monthly
interest rate.
1051.61
74990
-165,776.92
Present value of payments plus cash
advanced.
240
129963.35
1,693.97 Monthly payment received by lender
2000
9.58 Annual interest rate paid by borrower.