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Question 2 - Calculation of DSR and DSCR Terence Solomon is seeking a consumer loan from your bank to purchase furniture and household appliances. He
Question 2 - Calculation of DSR and DSCR Terence Solomon is seeking a consumer loan from your bank to purchase furniture and household appliances. He earns a basic salary of $5,000. He also receives $500 per month from providing evening classes in his neighbourhood. The following are deductions from his salary: employee pension fund $550, social security $25.00 and tax $300.00. The following are Mr Solomon's monthly commitments: New loan $1500 750.00 Car loan Personal loan 500.00 Credit card 150.00 Utilities 145.00 Groceries 600.00 Entertainment 150.00 Car expense 135.00 Other 100.00 Calculate Mr Solomon's debt service ratio (DSR). (5 marks) Calculate Mr Solomon's debt service coverage ratio (DSCR). (5 marks) The bank's minimum DSCR is 1.20x. Would you recommend Mr Edwards for the loan? (5 marks)
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