Question

Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now, Madeline is living at home and works in a shoe store, earning a gross income of $1,100 per month. Her employer deducts a total of $240 for taxes from her monthly pay. Madeline also pays $150 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $210 per month.

Answer 1

The remaining part of the question reads;

Calculate her debts payments-to income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.)

Answer:

Debts payments-to income ratio without college loan = 35%

Debts payments-to income ratio with college loan = 50%

Step-by-step explanation:

Remember, the debt-to-income ratio is calculated by summing all the monthly debt payments and then divide by the gross monthly income. Madeline's monthly debts without college loan = $240 + $150 = $390.

Madeline's gross monthly income = $1100.

Debts payments-to income ratio = 35% (390/1100 *100)

Madeline's monthly debts with college loan = $240 + $150 + $210 = $600.

Madeline's gross monthly income = $1100.

Debts payments-to income ratio = 50% (600/1100*100).