Question

Jim has an annual salary of $96,000. His monthly expenses include a $2,500 mortgage payment, a $250 lease payment, $500 in minimum credit card payments, and a $425 payment on his speed boat. He also receives $1,200 in interest from his savings and other accounts each month. Calculate Jim’s DTI (debt-to-income) ratio.

Answer 1

Answer:

39.95%.

Step-by-step explanation:

We have been given that Jim has an annual salary of $96,000.

$\text{Debt to income ratio}=\frac{\text{Total annual expenses}}{\text{ Total annual income}}\times 100$

First of all we will find Jim's total monthly expenses by adding all his monthly expenses.

$\text{Jim's total monthly expenses}=\ 2500+\ 250+\ 500+\ 425$

$\text{Jim's total monthly expenses}=\ 3675$

Now let us find Jim's annual expenses by multiplying his monthly expenses by 12.

$\text{Jim's total annual expenses}=\ 3675\times 12$

$\text{Jim's total annual expenses}=\ 44,100$

As Jim receives $1,200 in interest from his savings and other accounts each month, so amount received in interest per year will be 12 times 1200.

$\text{Amount received from interest per year}=12\times \ 1200$

$\text{Amount received from interest per year}=\ 14400$

$\text{Jim's total annual income}=\ 14,400+\ 96,000$

$\text{Jim's total annual income}=\ 110,400$

Upon substituting Jim's total annual expenses and income in debt to income ratio we will get,

$\text{Jim's DTI}=\frac{\ 44,100}{\ 110,400}\times 100$

$\text{Jim's DTI}=0.399456521739\times 100$

$\text{Jim's DTI}=39.9456521739\%\approx 39.95%$

Therefore, Jim's debt-to-income ratio is 39.95%.

Answer 2

$96,000 : 12 = $8,000
His monthly income: $8,000 + $1,200 = $9,200
$2,500 + $250 + $500 + $425 = $3675 ( monthly debt )
DTI ratio:  3675 / 9200