Question
1. Robert owns a $197,000 town house and still has an unpaid mortgage of $176,000. In addition to his mortgage, he has the following liabilities:
1. Robert owns a $197,000 town house and still has an unpaid mortgage of $176,000. In addition to his mortgage, he has the following liabilities:
Liabilities | ||
Visa | $ | 637 |
MasterCard | 548 | |
Discover card | 440 | |
Education loan | 979 | |
Personal bank loan | 822 | |
Auto loan | 5,120 | |
Total | $ | 8,546 |
Roberts net worth (not including his home) is about $8,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.
(a) What is Roberts debt-to-equity ratio?
Debt-to-equity ratio____________
(b) Has he reached the upper limit of debt obligations?
-
No
-
Yes
2. Kim is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $1,200 per month. Her employer deducts $200 for taxes from her monthly pay. Kim also pays $140 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $132 per month. Help Kim make her decision by calculating her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.)
Debt payments-to-income ratio
ratio with college loan. ______% ratio without college loan _____%
3. Drews monthly net income is $1,200. What is the maximum he should use on debt payments?
Maximum monthly debt payments___________
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