Question

5 (II) Lisa Clark is evaluating her debt safety ratio. Her monthly take-home pay is

$3,240. Each month, she pays $435 for an auto loan, $110 on a personal line of credit, $55 on a department store charge card, and $110 on her bank credit card. Complete Worksheet 6.1 by listing Alyssa's outstanding debts.

a. Calculate her debt safety ratio. Round the answer to 1 decimal place. Enter debt safety ratio as a percentage.

b. Given her current take-home pay, what is the maximum amount of monthly debt payments that Alyssa can have if she wants her debt safety ratio to be 10.0%? Round the answer to the nearest dollar.

c. Given her current monthly debt payment load, what would Alyssa's take-home pay have to be if she wanted a 10.0% debt safety ratio? Round the answer to the nearest dollar.

Answer 1

Lisa Clark 's Monthly Take home pay = $ 3240

an her payment are:-

1)Auto Loan Payment = $ 435

2) Personal Line of Credit = $ 110

3) Departmental store charge card = $ 55

4) Bank credit card = $110

A)

Debt Safety Ratio = Consumer Debt Payments / Monthly take home pay

Consumer Debt payments = sum of all debt payments

=435 + 110 + 55 + 110

= 710

Putting above values in formula

Debt Safety Ratio = 710 / 3240 = > 21.9%

B)

Debt Safety Ratio to be 10%

Monthly take home pay = 3240

Debt Safety Ratio = Consumer Debt Payments / Monthly take home pay

let maximum amount of monthly debt payments be x

Putting above values in formula

10% = x / 3240

x = 3240 * 10%

=> 324

Maximum amount of monthly debt payments =$ 324

C)

Debt Safety Ratio to be 10%

Lisa's Monthly debt Payment load =435 + 110 + 55 + 110 = > 710

Let Monthly take home pay be x

Debt Safety Ratio = Monthly Debt Payments / Monthly take home pay

Putting above values in formula

10% = 710 / x

x = 710 / 10%

x = 7100

Lisa 's Monthly take home pay has to be $ 7100