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___________