Q: Can you walk me through on debt service on pg 6. how did you get 0.077316?
A: The debt constant is a unique number for every combination of a) interest rate, b) amortization period, and c) payment frequency, e.g., monthly or quarterly. In this instance the debt constant for a 6% interest rate amortized over 25 years and paid down monthly is 0.077316.
The debt constant gives us great precision in identifying annual debt service for any combination of interest rates, amortization periods, and payment frequency. It is very easy to use. It is available as an Excel function. If you wish, we can send you an Excel-based debt constant function that allows you to enter the combination of interest rates, amortization periods, and payment frequency to identify the appropriate debt constant.
Course overview: Commercial Real Estate