Tham khảo tài liệu 're academic press private real estate investment_8', tài chính - ngân hàng, đầu tư bất động sản phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | The Lender s Dilemma 211 2. If the borrower experiences a period of inflation unanticipated by the lender especially if the loan is granted at a fixed rate of interest he will reap leveraged equity growth as the appreciation of the entire property value is credited to his equity. Of course these benefits come at the expense of risk because leverage magnifies both profits and losses. The choice of how much debt to use often discloses a difference of opinion between borrowers and lenders about inflation expectations. When borrowers view inflation expectations differently than lenders they place a different value on the property. This results given fixed net operating income noi in borrower capitalization rates differing from lender capitalization rates. Some rearranging of the identities for Itv dcr and value will convince you that market value may be represented as either of the two identities in Equation 9-1 oi market value . 9-1 cr 12 constant dcr Itv where constant is the ratio of monthly installment payments required on the loan to the loan balance also the factor from Elwood Table 6 the payment to amortize 1 . Setting the two expressions for market value mv equal to each other and solving for capitalization rate cr produces Equation 9-2 . cr 12 constant dcr Itv 9-2 Although lenders have some discretion in the setting of interest rates due to competition and the influence of the Federal Reserve Bank the lender s discretion is across such a narrow range that it may be ignored for our purposes. Thus using an amortization period of 360 months and exogenously determined interest rates we assume that the choice of constant is essentially out of the control of the parties to the loan contract. This is not to preclude the borrower from electing a shorter amortization term to retire debt faster something he can do without agreeing to a shorter loan provided prepayment is allowed. We pointed out in Chapter 3 that if one does not model individual cash flows separately as
