Louise's monthly gross income is $2,700. Her employer withholds $540 in federal, state, and local income taxes and $216 in Social Security taxes per month. Louise contributes $108 per month for her IRA. Her monthly credit payments for Visa, MasterCard, and Discover cards are $36, $39, and $21, respectively. Her monthly payment on an automobile loan is $289. (a) What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 1 decimal place.) Debt payments-to–income ratio % (b) Is Louise living within her means? O Yes O No
Louise's monthly gross income is $2,700. Her employer withholds $540 in federal, state, and local income taxes and $216 in Social Security taxes per month. Louise contributes $108 per month for her IRA. Her monthly credit payments for Visa, MasterCard, and Discover cards are $36, $39, and $21, respectively. Her monthly payment on an automobile loan is $289. (a) What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 1 decimal place.) Debt payments-to–income ratio % (b) Is Louise living within her means? O Yes O No
Chapter3: Income Sources
Section: Chapter Questions
Problem 51P
Related questions
Question
Transcribed Image Text:Louise's monthly gross income is $2,700. Her employer withholds $540 in federal, state, and local income taxes and $216 in Social
Security taxes per month. Louise contributes $108 per month for her IRA. Her monthly credit payments for Visa, MasterCard, and
Discover cards are $36, $39, and $21, respectively. Her monthly payment on an automobile loan is $289.
(a) What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 1 decimal place.)
Debt payments-to-income ratio
%
(b) Is Louise living within her means?
O Yes
O No
Expert Solution
Step 1: Introduction
Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.
Formula to calculate debt-to-income ratio:
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you