Question

Johnny’s monthly expenses and income are listed below. Calculate Johnny’s debt-to-income (DTI) ratio.
Johnny's Monthly Debt and Income
Housing:
Rent
$950.00

Renter's Insurance
$25.00

Credit:
Student
$250.00

Car
$239.00

Credit Card #1
$25.00 (minimum)

Credit Card #2
$40.00 (minimum)

Income:
Sales Rep
$4,400.00

Tutoring
$600.00

a.
28%
b.
33%
c.
31%
d.
35%

Answer 1

Total monthly income = $4,400 + $600 = $5,000.

Monthly debt payments = rent $950 + renter’s insurance $25 + student $250 + car $239 + CC1 $25 + CC2 $40 = $1,529.

DTI = 1,529 / 5,000 = 0.3058 = 30.58% ≈ 31%.

Answer: c. 31%