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Bill has a take home pay of $4300 each month. He has the following monthly obligations: Rent $850, Utilities $200, Cable $150, Food $400, Car Payment $275, gas for car $160, Visa $85, Best Buy loan $75, Khol’s $52, Master Card $50. What is Bill’s Debt Safety Ratio? What is the suggested range for a Debt Safety Ratio? Is Bill within the suggested range?

Respuesta :

Bill's Debt safety ratio is 53.41860465116279

Suggested range for a Debt Safety Ratio 25- 35%

Bill is not within the suggested range

Explanation:

Bill's take-home pay is $4300 each month.

Bill's monthly debts are Rent $850, Utilities $200, Cable $150, Food $400, Car Payment $275, gas for car $160, Visa $85, Best Buy loan $75, Khol’s $52, Master Card $50.

  • Bill's total monthly debts is $2297.
  • Debt safety ratio = (Monthly debt payments / Monthly take-home pay) * 100
  • Debt safety ratio = (2297/4300) * 100
  • Debt safety ratio = (0.5341860465116279) * 100
  • Debt safety ratio = 53.41860465116279

Most advisers recommend that your debt service ratio should not reach 35 percent, and should be around 25 percent ideally.

  • Since Bill's Debt safety ratio is 53.41860465116279, he is not within the suggested range.

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