Question

Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with an annual income of $86,250.

Answer 1

Answer:

Option A.

Step-by-step explanation:

Annual income = $86,250

Monthly income = $\frac{\ 86,250}{12}=\ 7,187.5$

According to the 28/36 rule:

1. A household should spend no more than 28% of its gross monthly income on total housing expenses.

2. No more than 36% on all debt, including housing-related expenses and other recurring debt service.

36% - 28% = 8%

It means maximum allowable recurring debt is 8% of monthly income.

Maximum allowable recurring debt = $7,187.5\times \frac{8}{100}$

                                                           = $575

Therefore, the correct option is A.

Answer 2

The correct answer on e2020 is  $575.00