Question

section 8.7 homework
question 5, 8.7.11
part 3 of 3
hw score: 63.33%, 7.6 of 12 points
points: 0 of 1
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advice from most financial advisers states to spend no more than 28% of ones gross monthly income for ones mortgage payment, and to spend no more than 36% of ones gross monthly income for ones total monthly debt.
suppose a family has a gross annual income of $39,600.
a. what is the maximum amount the family should spend each month on a mortgage payment?
b. what is the maximum amount the family should spend each month for total credit obligations?
c. if the familys monthly mortgage payment is 70% of the maximum they can afford, what is the maximum amount they should spend each month for all other debt?
a. the maximum monthly mortgage payment should be $ 924
b. the maximum monthly total credit obligations should be $ 1188
c. the maximum amount they should spend monthly on all other debt is $

Explanation:

Step1: Find gross monthly income

$\text{Monthly Income} = \frac{\$39600}{12} = \$3300$

Step2: Confirm max mortgage (given)

$\text{Max Mortgage} = 0.28 \times \$3300 = \$924$

Step3: Confirm max total debt (given)

$\text{Max Total Debt} = 0.36 \times \$3300 = \$1188$

Step4: Calculate actual mortgage payment

$\text{Actual Mortgage} = 0.70 \times \$924 = \$646.80$

Step5: Compute other debt amount

$\text{Other Debt} = \$1188 - \$646.80 = \$561.60$

Answer:

a. $\$924$
b. $\$1188$
c. $\$561.60$