Finance
A Florida investor is evaluating a property's 'debt service coverage ratio' (DSCR). If the annual NOI is $120,000 and the annual debt service is $100,000, the DSCR is:
A0.83
B1.20✓ Correct
C1.00
D0.20
Explanation
DSCR = NOI ÷ Annual Debt Service = $120,000 ÷ $100,000 = 1.20.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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