Question

Louise McIntyre’s monthly gross income is $4,100. Her employer withholds $880 in federal, state, and local income taxes and $430 in Social Security taxes per month. Louise contributes $280 each month for her IRA. Her monthly credit payments for VISA and MasterCard are $175 and $195, respectively. Her monthly payment on an automobile loan is $285. What is Louise's debt payments-to-income ratio?

Answer 1

Louise's debt payments-to-income ratio is approximately 15.97%.

Step-by-step explanation:

To calculate Louise's debt payments-to-income ratio, we need to find the total amount of her debt payments and divide it by her monthly gross income.

First, let's calculate the total debt payments. Louise's monthly credit payments for VISA and MasterCard are $175 and $195, respectively, and her monthly payment for an automobile loan is $285. Therefore, her total debt payments are $175 + $195 + $285 = $655.

Next, let's calculate Louise's debt payments-to-income ratio. Her monthly gross income is $4,100, so her debt payments-to-income ratio can be calculated as ($655 / $4,100) x 100% = 15.97% (rounded to two decimal places). Therefore, Louise's debt payments-to-income ratio is approximately 15.97%.