Question

calculating colbys affordable rent
colby makes $58,320 annually and pays about 22% of his gross monthly income in federal and state taxes. he wants to find an apartment to rent for no more than 28% of his monthly income after taxes.
what is the monthly rent that colby can afford and how much will colby have remaining each month after paying rent and taxes?
$1,061.42 for rent, $2,729.38 remaining after rent and taxes
$1,061.42 for rent, $4,860 remaining after rent and taxes
$3,790.80 for rent, $4,860 remaining after rent and taxes
$1,069.20 for rent, $2,729.38 remaining after rent and taxes

Explanation:

Step1: Calculate gross monthly income

Colby's annual income is \$58,320. So gross monthly income = \( \frac{58320}{12} = 4860 \) dollars.

Step2: Calculate income after taxes

He pays 22% in taxes, so after - tax monthly income = \( 4860\times(1 - 0.22)=4860\times0.78 = 3790.8 \) dollars.

Step3: Calculate affordable rent

He wants to spend no more than 28% of after - tax income on rent. So rent = \( 3790.8\times0.28 = 1061.424\approx1061.42 \) dollars.

Step4: Calculate remaining amount after rent

Remaining amount = after - tax income - rent = \( 3790.8-1061.42 = 2729.38 \) dollars.

Answer:

\$1,061.42 for rent, \$2,729.38 remaining after rent and taxes