A lender requires a 1.20 debt coverage ratio as a minimum.If the net operating income of a property is $60,000,what is the maximum amount of debt service the lender would allow?
A)$30,000
B)$50,000
C)$60,000
D)$72,000

Question

Quizplus · Accepted Answer

The maximum amount of debt service the lender would allow can be calculated by dividing the net operating income by the debt coverage ratio:

Maximum debt service = Net operating income / Debt coverage ratio
Maximum debt service = $60,000 / 1.20
Maximum debt service = $50,000

Therefore, the maximum amount of debt service the lender would allow is $50,000, which is answer choice B.

A Lender Requires a 1