payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that's due late next year; he has a $70,000 home mortgage on which he's making $750 monthly payments; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments). Use Worksheet 7.1 to prepare an inventory of Leo's consumer debt. Find his debt safety ratio, given that his take- home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain.
payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that's due late next year; he has a $70,000 home mortgage on which he's making $750 monthly payments; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments). Use Worksheet 7.1 to prepare an inventory of Leo's consumer debt. Find his debt safety ratio, given that his take- home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:9:40
Worksheet6.1_How's My Credit (1) - Saved
fx
А В
D
G
N
1
2
MONTHLY CONSUMER LOAN PAYMENTS & DEBT SAFETY RATIO
3
Name
Dated
October 22, 2021
6
Current
7
Monthly (or Min.)
Payment
8
Type of Loan*
Lender
9
Auto and Personal loans
1.
10
2.
11
3
12
Education loans
1.
13
2.
14
Overdraft Protection Line
1.
15
Personal line of credit
16
Credit Cards
1.
17
2.
18
3.
19
4.
20
Home Equity Line
1.
21
TOTAL MONTHLY PAYMENTS $
22
*Note: List only those loans that require regular monthly payments.
$
23
24
Monthly Take-Home Pay
1.
25
2.
26
ТОTAL MONTHLY TAKE HOMЕ PAY
$.
27
28
Debt Safety Ratio:
Total monthly payments
$
х 100'
$
30
100 =
0.0%
31
Total monthly take-home pay
33
• Changes needed to reach a new debt safety ratio
54
35
1. New (Target) debt safety ratio:
%
37
2. At current take-home pay of
39
total monthly payments must equal:
40
41
Total monthly take-home pay x Target debt safety ratio**
42
43
0.000 =
44
45
OR
New Monthly Payments
40
47
3. With current monthly payments of
40
49
total take-home pay must equal:
Total monthly payments
2$
x 100
51
x 100 = $
52
New (target) debt safety ratio
0.000
53
New take-home pay
34
55
**Note: Enter debt safety ratio as a decimal (e.g., 15%=0.15).
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
Transcribed Image Text:9:40
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Calculating debt safety ratio. Use
Worksheet 7.1. Every six months, Leo
Perez takes an inventory of the consumer
debts that he has outstanding. His latest
tally shows that he still owes $4,000 on a
home improvement loan (monthly
payments of $125); he is making $85
monthly payments on a personal loan
with a remaining balance of $750; he has
a $2,000, secured, single-payment loan
that's due late next year; he has a $70,000
home mortgage on which he's making
$750 monthly payments; he still owes
$8,600 on a new car loan (monthly
payments of $375); and he has a $960
balance on his MasterCard (minimum
payment of $40), a $70 balance on his
Shell credit card (balance due in 30 days),
and a $1,200 balance on a personal line of
credit ($60 monthly payments).
Use Worksheet 7.1 to prepare an
inventory of Leo's consumer debt. Find
his debt safety ratio, given that his take-
home pay is $2,500 per month. Would you
consider this ratio to be good or bad?
Explain.
3.
LO3
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7-4c. Buy on Time or Pay Cash? Chapter 7. Learning Ob
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