California Real Estate Practice Exam

An investor purchased a property, financing with a 75% loan-to-value ratio loan. Payments of interest only for the first 6 months was $6,000. Interest rate is 10%. What was the appraised value of the property?

1. $140,000

2. $150,000

3. $160,000

4. $170,000

The correct answer is: $140,000

To determine the appraised value of the property based on the given information, we start by using the loan-to-value (LTV) ratio and the interest payments to find the property's value. The LTV ratio is 75%, meaning the investor financed 75% of the property's appraised value with a loan. The loan amount can be calculated from the interest payments made in the first six months. Given the interest rate of 10%, we can find the annual interest payment as follows: The interest paid over 6 months was $6,000, which corresponds to half of the annual interest since it is an interest-only loan. Therefore, the annual interest amount would be: \[ Annual Interest = $6,000 \times 2 = $12,000 \] Now, knowing that the annual interest is calculated from the loan amount at a 10% interest rate, we can derive the loan amount: \[ Loan Amount = \frac{Annual Interest}{Interest Rate} \] \[ Loan Amount = \frac{12,000}{0.10} = $120,000 \] Since this loan amount represents 75% of the appraised value, we can calculate the appraised value (V) of