ERAT 409, anything, mortgage, provided

BC_MBA_student

Schweser Exam 3 AM session question 34 - they are calculating ERAT - they use an outstanding mortgage balance of 32,000,000. Anyone know how this came about?
If u haven't taken the exam, the example provided in the book is on page 18 in book 4. (** less outstanding mortgage balance of 409,799)

I know its a pretty simple calc but i cant figure it out for anything.
On a side note this freakin exam kicked me in the gonads.

Pegasus2008

It kicked me in the (female version of) gonads too!

I think it's 32,000,000 because the debt service is interest only - no principal payments, thus, the outstanding mortgage at the end is the same as beginning (80% of 40M - 32M)

ninja1024

good deal - thanks dr.