Question

john just moved out of state and, in doing so, had to take a salary cut. at his previous job, his annual salary was \\$47,000 and his monthly expenses included a \\$850 rent payment, a \\$325 car payment, and \\$375 in minimum credit card payments. his new job has a salary of \\$43,500. he has the same car payment and minimum credit card payments, but his new apartment costs a mere \\$625 per month. how did johns move affect his debt-to-income (dti) ratio?
a. johns dti ratio decreased by 3%.
b. johns dti ratio increased by 3%.
c. johns dti ratio decreased by 9%.
d. johns dti ratio increased by 9%.

Explanation:

Calculate previous monthly gross income and total debt payments

Using the Monthly Gross Income and Debt-to-Income Ratio knowledge points

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Calculate previous debt-to-income (DTI) ratio

Using the Debt-to-Income Ratio knowledge point

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Calculate new monthly gross income and total debt payments

Using the Monthly Gross Income and Debt-to-Income Ratio knowledge points

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Calculate new debt-to-income (DTI) ratio

Using the Debt-to-Income Ratio knowledge point

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Determine the change in DTI ratio

Using the Debt-to-Income Ratio knowledge point

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The DTI ratio decreased by approximately \(3\%\).

Answer:

• a. John's DTI ratio decreased by 3%. (Correct answer)
• b. John's DTI ratio increased by 3%.
• c. John's DTI ratio decreased by 9%.
• d. John's DTI ratio increased by 9%.