Question

Given the expenses and income below, what is the back ratio? monthly expenses: mortgage (including all housing costs) = $1,982 student loan = $258 minimum credit card payments = $184 home equity loan = $237 monthly income: salary = $4,115 bonus = $700 side business = $1,000 dividends/interest = $95

a. 28.3%
b. 36.1%
c. 35.5%
d. 45.0%
e. None of these

Answer 1

The back ratio is found by dividing total monthly expenses by total monthly income. In this case, it is $2,661 divided by $5,910, which equals 0.4502, or 45.02%. Therefore, the back ratio is 45.0% (choice d).

Step-by-step explanation:

To calculate the back ratio, we need to add up all of the monthly expenses and divide by the total monthly income. The student provided the following expenses:

• Mortgage (including all housing costs) = $1,982
• Student loan = $258
• Minimum credit card payments = $184
• Home equity loan = $237

And the following sources of income:

• Salary = $4,115
• Bonus = $700
• Side business = $1,000
• Dividends/interest = $95

First, we sum up the monthly expenses:

$1,982 + $258 + $184 + $237 = $2,661

Then, we sum up the monthly incomes:

$4,115 + $700 + $1,000 + $95 = $5,910

Now, we divide the total expenses by the total income to find the back ratio:

$2,661 / $5,910 = 0.4502, or 45.02%

Rounded to the nearest tenth, the back ratio is 45.0%, which corresponds to answer choice (d).