Clare's gross salary is $36,000 annually and her after-tax income is $28,800.What is Clare's maximum recommended monthly consumer credit payment?

Question

Quizplus · Accepted Answer

To find Clare's maximum recommended monthly consumer credit payment, we need to consider her net income (after-tax income). Net income is calculated by dividing the gross income by 1 plus the tax rate. Let's first calculate the tax rate:

Tax rate = (gross income - net income) / gross income
Tax rate = (36,000 - 28,800) / 36,000
Tax rate = 0.2 or 20%

Now we can calculate Clare's net income:

Net income = gross income / (1 + tax rate)
Net income = 36,000 / (1 + 0.2)
Net income = 30,000

To be financially responsible, Clare's maximum recommended monthly consumer credit payment should not exceed 20% of her net income.

Maximum recommended monthly consumer credit payment = 0.2 * 30,000 / 12
Maximum recommended monthly consumer credit payment = $500

Since none of the answer choices are exactly $500, we should choose the closest one. The closest answer choice is B, $480. Therefore, Clare's maximum recommended monthly consumer credit payment is $480.

Clare's Gross Salary Is $36,000 Annually and Her After-Tax Income