Kim Lee is trying to decide whether she can afford a loan she needs in order to

Question

Kim Lee is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $2410 per month. Her employer deducts a total of $220 for taxes from her monthly pay. Kim also pays $75 on credit card debt each month. The loan she needs for chiropractic school will cost an additional $100 per month. Calculate her debt payments-to-income ratio without college loan. Remember to convert your answer to a percentage! Make sure to include zeros and the period in your answer. Round your answer to 2 decimal places. i.e. 13.55, 21.89, 8.21, 10.99, etc. Do not include the "%" sign in your response.

Explanation / Answer

Gross Income = $2410
Income after tax = 2410-220 =2190

Ratio without college loan

Debt = Credit card debts = 75
Debt/income ratio= 75/2190 =0.0342 =3.42%

Ratio with college loan

Debt = Loan payments + credit card debt =75+100 = 175
Debt/Income ratio=175/2190=0.0799=7.99%

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