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

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

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

Calculate total monthly debt payments

$$ \text{Total Monthly Debt} = \$2,500 + \$250 + \$500 + \$425 = \$3,675 $$

Calculate debt-to-income ratio

$$ \text{DTI} = \frac{\$3,675}{\$9,200} \approx 0.39945 \approx 40\% $$

Answer:

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