Question

johnnys monthly expenses and income are listed below. calculate johnnys debt-to-income (dti) ratio.

housing: rent $950.00, renters insurance $25.00
credit: student $250.00, car $239.00, credit card #1 $25.00 (minimum), credit card #2 $40.00 (minimum)
income: sales rep $4,400.00, tutoring $600.00

a. 28%
b. 33%
c. 31%
d. 35%

Explanation:

Sum monthly debt obligations

$$ \text{Debt} = 950.00 + 25.00 + 250.00 + 239.00 + 25.00 + 40.00 = 1529.00 $$

Sum monthly gross income

$$ \text{Income} = 4400.00 + 600.00 = 5000.00 $$

Calculate debt-to-income ratio

$$ \text{DTI} = \frac{1529.00}{5000.00} = 0.3058 \approx 31\% $$

Answer:

• a. 28%
• b. 33%
• c. 31% (Correct answer)
• d. 35%