Question

Given the following information, calculate debt payments ratio percentage. (Round your answer to 2 decimal places.)...

Given the following information, calculate debt payments ratio percentage. (Round your answer to 2 decimal places.)

Liabilities = $41,500

Liquid assets = $8,300

Monthly credit payments = $1,650

Monthly savings = $1,270

Net worth = $98,000

Current liabilities = $3,300

Take-home pay = $4,000

Gross income = $8,600

Monthly expenses = $5,440

Homework Answers

Answer #1

Sol:

To compute Debt payments ratio percentage:

A debt-to-income or debt payment ratio is computed by dividing your monthly debt payments by your monthly gross income. The ratio is expressed as a percentage, and lenders use it to determine how well you manage your monthly debts and if you can afford to repay a loan. Consumers with higher Debt payments ratio are risky for the lender, because there is a high possibility of default repaying their loan in case of financial crisis.

Debt payments ratio = Monthly credit payments / Take-home pay

Debt payments ratio = $1650 / $4000 = 0.4125 or 41.25%

Therefore debt payments ratio is 41.25%

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