I hope this question isn’t totally idiotic, maybe I’m just missing a brain chip today but here goes: I was trying to calculate the SFF to get to the Mortgage Constant using the band-of-investment method, and I don’t understand how to do this on my calculator (using BAII). Is this like calculating a regular annuity due? Thanks.
BOI method is about valuing real estates which are financed by a mix of debt and equity financing. And Cap Rate = Ro(BOI) = (MW * MC) + (EW * EC) So say, we used 1. 80% debt @ 5% monthy payment & maturity = 20 years AND 2. 20% equity @ 15% payment so, EW = 0.20 EC = 0.15 MW = 0.80 MC = 0.05 + SFF To Calculate SFF, just feed in the following registers N= 20*12 = 240 I/Y= 5/12 = 0.4167 PV= 0 FV= -1 CPT–>PMT = 0.002432 *12 = 0.029184 Hence, MC = 0.05 + 0.029184 = 0.079184 The notion being, if you keep saving 2.9 cents per year for the next 20 years, you will be able to finanace your $1 laundry 20 years from now. Now substitute to get the Ro…
Thanks Dinesh!