$2,500 per month. She has the following monthly debt payment expenses: $75 for credit cards, $125 for student loans, and a $235 car payment. She is looking to buy a house. The monthly mortgage, including principal, insurance, and taxes, is $900. Does Rimi meet the

$2,500 per month. She has the following monthly debt payment expenses: $75 for credit cards, $125 for student loans, and a $235 car payment. She is looking to buy a house. The monthly mortgage, including principal, insurance, and taxes, is $900. Does Rimi meet the

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 25PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

1) Calculate: Rimi currently earns
$2,500 per month. She has the
following monthly debt payment
expenses: $75 for credit cards, $125
for student loans, and a $235 car
payment. She is looking to buy a
house. The monthly mortgage,
including principal, insurance, and
taxes, is $900. Does Rimi meet the
FHA housing payments-to-income
ratio guideline?
O
O
O
O
Yes, because her ratio is less
than 31%.
No, because her ratio is
greater than 31%.
Yes, because her ratio is less
than 43%.
No, because her ratio is
greater than 43%.

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