1) What is the debt service coverage ratio for a $1.8 million property generating a 6.5% before tax annual return on equity with a $1.5 million ten year interest-only first mortgage at a 5.5% annual interest rate?

a) 1.42

b) 1.24

c) 0.83

d) 0.71

2) A borrower can obtain an 80% fully amortizing loan at a 6.0% annual interest rate with equal monthly payments of principal and interest over 30 years, or obtain a 90% fully amortizing loan for 30 years at a 6.5% annual interest rate with equal monthly payments. What is the incremental annual borrowing cost for the additional loan amount if each loan is outstanding for the full term?

a) 12.5%

b) 10.2%

c) 8.3%

d) 6.5%