Question

Kathleen's gross annual salary is $56,820.

What is the maximum amount of rent she can afford to pay?

Round your answer to the nearest dollar.

Question 1 options:

$1146


$1326


$1656


$2368

Answer 1

Answer: $1326

Explanation:

Step 1.

Multiply annual salary by 28%

28% to a decimal is 0.28

$56,820 x 0.28= $15909.6

Step 2.

Divide by 12 to find the monthly amount

$15909.6/12= 1325.8

Answer 2

In general, a maximum of 25% to 30% of one's gross income can be spent on rent. So, according to this lets find out the values.

Given is,

The gross annual salary of Kathleen = $56820

So, her monthly income becomes =
`(56820)/(12)= 4735`

So, its 25% is =
`(25)/(100)*4735` = 1183.75

And 30% becomes =
`(30)/(100)*4735` = 1420.50

If we take an average of both, as the value will lie between these two figures we get, (1183.75+1420.50)/2 = $1302.12

Hence, this value lies close to $1326. So, the answer will be option B - $1326