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Answer:
The answer is B.20%
Step-by-step explanation:
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The front-end debt to income ratio of Beau is given by: Option B: 20%
How to calculate the front-end debt to income ratio?
The front-end debt to income ratio for this case is calculated as follows:
[tex]\text{Front-end debt to income ratio} = \dfrac{\text{Housing expenses}}{\text{Gross monthly income}} \times 100[/tex]
Calculating all the housing expense of Beau:
Annual adjusted gross income = $89,750,
Thus, his mothly gross income = $89,750/12 ≈ $7479.167
Semiannual homeowner's insurance payment = $635
Thus, as semiannual = 6 months, thus:
monthly homeowner's insurance payment = $635/6 ≈ $105.83
Yearly property taxes = $4,785
Monthly property taxes = $4,785/12 = $398.75
Monthly credit card payment = $2 (not in housing expense)
Monthly car payment = $250 (not in housing expense)
Monthly mortgage payment = $1,025
Thus, total housing expense (adding only housing expenses) ≈ $(105.83 + 398.75 + 1,025) = $1781.58
Thus, we get:
[tex]\text{Front-end debt to income ratio} = \dfrac{\text{Housing expenses}}{\text{Gross monthly income}} \times 100\\\\\text{Front-end debt to income ratio} \approx \dfrac{1529.58}{7479.167} \times 100 \approx 20 \%[/tex]
Thus, the front-end debt to income ratio of Beau is given by: Option B: 20%
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