using the 28/36 ratio, determine the maximum allowable recurring debt for someone with a monthly income of…

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

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

Answer

Explanation:

Step1: Understand the 28/36 ratio

The 36% in the 28/36 ratio is the maximum percentage of monthly income that can be used for total debt (including housing - related and recurring debt).

Step2: Calculate 36% of the monthly income

The monthly income is $3200. 36% of 3200 is $3200\times0.36 = 1152$.

Step3: Assume housing - related debt is 28% of income

28% of 3200 is $3200\times0.28=896$.

Step4: Calculate recurring debt

Recurring debt = Total debt limit - Housing - related debt. So, recurring debt = $1152 - 896=256$.

Answer:

A. $256