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Madeline Rollins is trying to decide whether she can afford a loan she needs in order...

Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now, Madeline is living at home and works in a shoe store, earning a gross income of $1,020 per month. Her employer deducts a total of $200 for taxes from her monthly pay. Madeline also pays $130 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $170 per month.

Calculate her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.)

debt payments to income ratio

With college loan: %

Without college loan : %

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Answer #1

Debt payments to income ratio with college loan = Debt payments / Income
= ($130 + $170) / ($1,020 - $200)
= $300 / $820
= 36.59%

Debt payments to income ratio Without college loan = $130 / ($1,020 - $200)
= 15.85%


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