Question

jon earns a gross income of $42,000 per year as a young engineer. his debt payments, including student loan and mortgage payments, are $1,300 per month. how much more can he take on in monthly debt payments and not go over the dangerous 40 percent ratio of debt payment to gross income?
a. $200
b. no more, he is already over the limit.
c. $300
d. $100

Explanation:

Step1: Calculate monthly gross income

$42000\div12 = 3500$

Step2: Calculate maximum monthly debt payment

$3500\times0.4=1400$

Step3: Calculate additional debt - payment capacity

$1400 - 1300=100$

Answer:

D. $100$