Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are...

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Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are low. Her bank has specif installment loan payments. The bank then calculates and compares certain ratios to predetermined allowable values to determin

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Answer 1

Answer #1

a. Ratio for Monthly Mortgage Payments = Monthly Gross Mortgage Payments/Monthly before Tax Gross Income

= 1070/4420

= 0.24208

= 24.21%

b. Ratio for Total Monthly Payments = Mortgage Payments + Installment/ Monthly Before Tax Gross Income

= (1070+372)/4420

= 31.61%

According to Ratio 1 and 2 she can be given a loan.

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Answer 2

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