Question

jim has an annual salary of \\$96,000. his monthly expenses include a \\$2,500 mortgage payment, a \\$250 lease payment, \\$500 in minimum credit card payments, and a \\$425 payment on his speed boat. he also receives \\$1,200 in interest from his savings and other accounts each month. calculate jims dti (debt-to-income) ratio.
a. 30%
b. 35%
c. 40%
d. 45%

Explanation:

Calculate monthly gross income

Using the Monthly Gross Income knowledge point

$$ \text{Monthly Salary} = \frac{\$96,000}{12} = \$8,000 $$

$$ \text{Monthly Interest Income} = \$1,200 $$

$$ \text{Total Monthly Gross Income} = \$8,000 + \$1,200 = \$9,200 $$

Calculate total monthly debt payments

Using the Debt-to-Income Ratio knowledge point

$$
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Calculate the debt-to-income ratio

Using the Debt-to-Income Ratio knowledge point

$$ \text{DTI Ratio} = \frac{\text{Total Monthly Debt}}{\text{Total Monthly Gross Income}} \times 100\% $$

$$ \text{DTI Ratio} = \frac{\$3,675}{\$9,200} \times 100\% \approx 39.946\% \approx 40\% $$

Answer:

• a. 30%
• b. 35%
• c. 40% (Correct answer)
• d. 45%