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27 June, 10:36

Affan Chawdry has monthly net income of $1,050. He has a house payment of $450 per month, a car loan with payments of $375 per month, a Visa card with payments of $50 per month, and a credit card with a local department store with payments of $100 per month. What is Affan's debt payments-to-income ratio

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  1. 27 June, 11:25
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    92.86%

    Explanation:

    Debt-to-income ratio is a comparison or personal debts against income. It is used to assess an individual ability to accommodate more debts.

    The formula for for calculating Debt to income is

    Debt to income is Total of Monthly Debt Payments

    Gross Monthly Income

    For Affan, Total debts are $450 + $375 + $50 + $100 = $ 975

    Gross income is not given, we use net income which is $1,050

    Debt to income ration = $975/$1050

    = 0.92857 x 100

    = 92.86%
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