Question

Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with a monthly income of $4,850.

Answer 1

Answer:

The correct answer is A. $388

Step-by-step explanation:

The 28/36 Rule states that : A household should spend a maximum of 28% of its gross monthly income on total housing expenses and not more than 36% on total debt service.

Maximum expense on housing expense = 28% of 4850

                                                                    = $1358

Maximum expense on total debt service = 36% of 4850

                                                                    = $1746

Therefore, the maximum allowable recurring debt with a monthly income of $4,850 = 1746 - 1358 = $388

Hence, The option A is correct.