Asked by Reylan Davis on Apr 27, 2024
Verified
Angela has a monthly gross income of $3,000 and her expenses are $1,200.What is her back-end ratio?
A) 25%
B) 30%
C) 40%
D) 45%
Gross Income
The total income earned before any deductions or taxes are subtracted.
Back-end Ratio
A debt-to-income ratio that calculates the percentage of a person's gross income going toward paying all debt obligations, including mortgage and auto loans.
Expenses
Costs incurred or money spent on goods and services.
- Acquire knowledge and evaluate the principle of ratio along with its utilization in financial choices pertaining to individual income and outlays.
Verified Answer
HH
Henry HooksApr 29, 2024
Final Answer :
C
Explanation :
The back-end ratio is calculated by dividing total monthly debt payments by gross monthly income. Since Angela's expenses are $1,200, her debt payments would be $0. Therefore, her back-end ratio would be $0/$3,000 = 0%. However, it is important to note that a back-end ratio of 0% does not necessarily mean financial stability as it may indicate a lack of credit history or debt obligations. Therefore, assuming Angela does not have any debt payments, the closest answer choice would be C, which is 40%.
Learning Objectives
- Acquire knowledge and evaluate the principle of ratio along with its utilization in financial choices pertaining to individual income and outlays.