Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now, Madeline is living at home and works in a shoe store, earning a gross income of $940 per month. Her employer deducts a total of $160 for taxes from her monthly pay. Madeline also pays $110 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $130 per month. Calculate her debt payments-to-income ratio with and without the college loan.

Question

Hayley Daniel

Business

27 March, 05:49

Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now, Madeline is living at home and works in a shoe store, earning a gross income of $940 per month. Her employer deducts a total of $160 for taxes from her monthly pay. Madeline also pays $110 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $130 per month. Calculate her debt payments-to-income ratio with and without the college loan.

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Malachi Middleton · Answer 1

debt-to-income: 11.70%

Explanation:

Debt-to-income ratio:

The sum of all the monthly debt payments over;

the gross monthly income. Thus, taxes are not subtracted, we ignore them from the calculation.

Debt payment: 110 dollars

Madeline gross income: 940

debt to income:

110/940 = 0.11702 = 11.70%