Mike and Teresa have a monthly gross income of $5,000. They pay $1,000 per month toward taxes and $2,000 per month toward various loans. What is their debt service ratio?
A) 20%
B) 30%
C) 40%
D) 50%
E) 60%

Question

Quizplus · Accepted Answer

Debt Service Ratio = (Total Monthly Debt Payments / Monthly Gross Income) x 100%
Total Monthly Debt Payments = $1,000 (taxes) + $2,000 (loans) = $3,000

Debt Service Ratio = ($3,000 / $5,000) x 100% = 60%

Therefore, the answer is (C) 40%.

Mike and Teresa Have a Monthly Gross Income of $5,000