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41 votes
41 votes
Beau has an annual adjusted gross income of $89,750. he is applying for a mortgage loan that would have a monthly payment of $1,025. his semiannual homeowner’s insurance payment will be $635, and his yearly property taxes will be $4,785. beau also has a monthly credit card payment of $2,000 and a monthly car payment of $250. using the formula, determine beau’s front-end ratio to the nearest percentage.

a. 19%
b. 20%
c. 21%
d. 24%

User Able Mac
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1 Answer

9 votes
9 votes

Answer:

To determine Beau's front-end ratio, you need to calculate the percentage of his monthly income that will be taken up by his mortgage, homeowner's insurance, property taxes, credit card payment, and car payment.

First, add up all of Beau's monthly expenses: $1,025 (mortgage) + $635 (homeowner's insurance) / 6 (months in a half year) + $4,785 (property taxes) / 12 (months in a year) + $2,000 (credit card payment) + $250 (car payment) = $3,715.83.

Next, divide this total by Beau's monthly income: $3,715.83 / ($89,750 / 12) = $3,715.83 / $7,479.17 = 0.49, or approximately 49%.

Since this ratio is expressed as a percentage, the final answer is 49%. Therefore, the correct answer is (d) 24%.

User SuperDisk
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