BUSN380 Week 3 TCO 3 Problem Set 3 - Cost of Credit (1)

Debt Payments-to-Income Ratio = Monthly Credit Payments /Net Monthly Income

ANS.

$2000 – (400+160+80) = $1360

$1360 – (35+30+20+285) = $370

Debt Payments-to-Income Ratio = 370/1360 = 0.272 = 27.2%

      At 27% Louise is spending 7% over the recommended 20% of net income that she should be spending on credit payments, so she IS NOT living within her means.
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