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15 May, 18:08

Louise McIntyre's monthly gross income is $3,500. Her employer withholds $820 in federal, state, and local income taxes and $370 in Social Security taxes per month. Louise contributes $220 each month for her IRA. Her monthly credit payments for VISA and MasterCard are $125 and $120, respectively. Her monthly payment on an automobile loan is $315.

a. What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 2 decimal places.)

b. Is Louise living within her means?

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  1. 15 May, 19:12
    0
    1. 26.79%

    2. No

    Explanation:

    a. The computation of debt payment to income ratio is shown below:

    The income would be equal to

    = Monthly gross income - federal, state, and local income tax - social security taxes - IRA

    = $3,500 - $820 - $370 - $220

    = $2,090

    And, the debt payments equal to

    = Visa card + master card + automobile loan

    = $125 + $120 + $315

    = $560

    So, the debt payment to income ratio would equal to

    = $560 : $2,090

    = 26.79%

    b. we conclude that debt percentage is more than the monthly payments.
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