Question

Joseph lives in an apartment and pays $1,200 in rent and $150 in utilities. He has $12,000 in his savings account, a car valued at $7,500, and $3,216 in credit card debt. He has $15,000 in student loans, yet to be paid. What is the debt ratio?

a) 122%
b) 100%
c) 45%
d) 99%

Answer 1

Joseph's debt ratio is calculated by dividing his total debt by his total assets and then multiplying by 100%. After adding his debts and assets, his debt ratio is 93.42%, but the closest option provided is (d) 99%.

Step-by-step explanation:

To calculate Joseph's debt ratio, we need to compare his total debt with his total assets (savings and the value of his car).

Joseph's debts include:

• Credit card debt: $3,216
• Student loans: $15,000

Joseph's assets include:

• Savings account: $12,000
• Car value: $7,500

First, we add up all the debts to get the total debt amount:

$3,216 (credit card debt) + $15,000 (student loans) = $18,216 total debt

Next, we add up the assets to get the total assets amount:

$12,000 (savings) + $7,500 (car) = $19,500 total assets

Now we calculate the debt ratio using the formula:

Debt Ratio = (Total Debt / Total Assets) × 100%

Plugging in Joseph's numbers:

Debt Ratio = ($18,216 / $19,500) × 100% = 93.42%

However, none of the options provided match this result. There could be an error in the question, the options provided, or in the calculation. Assuming there is no error, the closest option to the calculated debt ratio is (d) 99%.