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5 February, 16:12

Timothy Carter has net monthly income of $5,400. He has a monthly auto loan payment of $750, a student loan payment of $390, a mortgage payment of $1,700, and a credit card minimum payment of $125. What is his debt-payments-to-income ratio? (Round your answer to 1 decimal)

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  1. 5 February, 16:37
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    54.9%

    Explanation:

    To calculate your debt to income ratio, you must add all your monthly debt payments and divide that number by your monthly gross income:

    Timothy's total monthly debt payments = auto loan ($750) + student loan ($390) + mortgage ($1,700) + credit card ($125) = $2,965

    Timothy's debt to income ratio = $2,965 / $5,400 = 54.9%

    Timothy has too many debts, a good debt to income ratio shouldn't exceed 36-40%.
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