Okay, time for part 2. To recap, the scenario from Part 1 is as follows:
THE SCENARIO
I came across a note for sale. The terms of the note are as follows:
Original balance: $6,000
Unpaid balance as of June 2: $4,560
Term: 5 years
Interest Rate: 0
Payments: $100 per month
If I buy it, make the purchase on June 2, and the first payment I'll receive will be the July payment.
Every February, the borrower pays off $1,000 in order to accelerate the note paydown.
QUESTION
If I buy the note for its face value ($4,560), what will my yield (or Return On Investment, or the Internal Rate of Return of the deal) be?
... Read more...