The following items and amounts were taken from Wildhorse Co.’s 2017 income statement and balance sheet.
1 answer:
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Answer:
a) 27.2%
b) No
Explanation:
Given:
Monthly gross income = $2,000
Federal, state, and local income taxes = $400
Social Security taxes per month = $160
IRA per month = $80
Monthly credit payments for Visa, = $35
Monthly credit payments for MasterCard, = $30
Monthly credit payments for Discover cards = $20
Automobile loan payment = $285
Now,
Net income of Louise = Gross income - Total Taxes - IRA
= $2,000 - ( $400 + $160 ) - $80
= $1,360
Total debt payments = Credit card payments + Automobile loan payment
= ( $35 + $30 + $20 ) + $285
= $370
Therefore,
Debt payments-to-income ratio =
=
= 0.272
or
= 0.272 × 100% = 27.2%
(b) An individual should not spend more than 20% of their net income as debt to be within the means.
Since, the debt payments-to-income ratio exceeds 20 percent of her net income.
Hence, Louise is not living within her means
Answer:
b. −1.79 percent
Explanation:
You can solve this using a financial calculator. I'm using TI BA II plus ;
First, find Price of the bond if YTM = 5.5%. Since it is semi-annual, adjust the YTM and total duration;
N = 13*2 = 26
I/Y = 5.5%/2 = 2.75%
PMT = (6%/2)*1000 = 30
FV = 1,000
CPT PV = $1046.01
Next, find Price of the bond if YTM = 5.7%.
N = 13*2 = 26
I/Y = 5.7%/2 = 2.85%
PMT = (6%/2)*1000 = 30
FV = 1,000
CPT PV = $1027.28
Percentage change =[ (New price- Old price)/Old price] *100
= -1.79%