Answer:
5.89%
Explanation:
Income from a mortgaged property is divided into two section, first the loan payment and the second one is dividend for equity holder. These value are decided according to their ratio in the property value.
In this question the value of $15 million is divided into equity portion and loan portion by 25% and 75% respectively.
As per given data
Total value of property = $15 million
Value associated with Loan = $15 million x 75% = $11.25 million
Value associated with Equity = $15 million x 25% = $3.75 million
Net operating Income = $1,400,000
Loan Payment = $1,179,000
The residual value from income after loan payment is associated with the equity.
Net Income = $1,400,000 - $1,179,000 = $221,000
The net Income amount is associated with equity. So, we can calculate the equity dividend rate as follow
Equity Dividend Rate = ($221,000 / $3,750,000) x 100 = 5.89%