Taking Out a Motorcycle Loan. Kevin Jones, of Elon, North Carolina, is single and recently graduated from law school. He is employed and earns $9,000 per month, an awesome salary for someone only 26 years old. He also has $1,800 withheld for federal income tax,

$500 for state income taxes, $700 for Medicare and Social Security taxes, and $230 for health insurance every month. Kevin has outstanding student loans of almost

$80,000 on which he pays about $900 per month and a 0% loan on an auto loan payment of $300 on a Ford Fusion Hybrid he purchased new during law school. He is considering taking out a loan to buy a Kawasaki motorcycle.

(a) What is Kevin’s debt payments-to-disposable income ratio?

(b) Based on your answer to (a), how would you advise Kevin about his plan?

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