Ahmed's take-home pay is 75 percent of his gross pay. His annual salary is $50,000. Use...
Ahmed's take-home pay is 75 percent of his gross pay. His annual salary is $50,000. Use the 20/10 Rule to determine his maximum borrowing?
Homework Answers
As per rule 20/10, the maximum amount an individual can take is 20% of the earnings after taxes. The earnings of Ahmed is 75% of the gross annual salary, thus the maximum amount of loan is the product of earnings after taxes and 20%.
Compute the maximum borrowing amount, using the equation as shown below:
Maximum borrowings = Annual salary*Take-home pay percentage*20%
= $50,000*75%*20%
= $7,500
Hence, the maximum borrowing amount is $7,500.
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