Answer:
Option A- John's DTI ratio decreased by 3%.
Explanation:
Given : 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.
To find : How did John's move affect his debt-to-income (DTI) ratio?
Solution :
His previous job salary is $47,000 and have monthly expenses
Rent payment = $850
Car payment = 325
Minimum credit card payment = $375
His DTI is sum of all expenses into 12 divided by his salary.
DTI is in the percentage form.
Therefore, DTI of previous salary is 39.5% .......[1]
His new job salary is $43,500 and have monthly expenses
Rent payment = $625
Car payment = 325
Minimum credit card payment = $375
His DTI is sum of all expenses into 12 divided by his salary.
DTI is in the percentage form.
Therefore, DTI of new salary is 36.5% ........[2]
from [1] and [2] DTI decreases.
Affect in his debt-to-income ratio is subtraction of [1] - [2]
Change = 39.5%-36.5% = 3%
Hence, Option A- John's DTI ratio decreased by 3%.