Question

Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with a monthly income of $3,200. A. $256 b. $512 c. $640 d. $896 Please select the best answer from the choices provided A B C D.

Answer 1

The answer is a. $256

Step-by-step explanation:

The computation of the maximum allowable recurring debt is shown below:

Given ratio = 28:36

And the monthly income is $3,200

So the maximum expense on housing = 28% of $3,200 = $896

And, the maximum expense on total debt = 36% of $3,200 = $1,152

Now the maximum alloweable recurring debt is

= $1,152 - $896

= $256