Answer:
Debt payments to income ratio = 22.74%
Explanation:
Debts payment to Income ratio is calculated as follows:
= [tex]\frac{Total\ debt\ payment}{Total\ Income}[/tex]
We have total debts payment = auto loan payment $685 + student loan payment $375 + credit card payment $125 = $1,185
Total Income = $5,210
Note: Credit card is also a kind of debt as firstly all the expenses are met during the period and then the payment is made at the end of the period, therefore, there is a loan in the period. Therefore, it will be considered for payment of debt.
Debt payments to income ratio = [tex]\frac{1,185}{5,210} = 22.74[/tex]
That means the debts are 22.74% of income.
