Chapter $7$

Financial Planning Exercise $2$

Calculating debt safety ratio

Use Worksheet $7\mathrm{.}1.$ Every $6$ months, Leo Perez takes an inventory of the consumer debts he has outstanding. His latest tally shows that he still owes $$3,250$ on a home improvement loan $($monthly

home mortgage on which he's making $$500$ monthly payments; he still owes $$9,800$ on a new car loan $($monthly payments of $$525)$; and he has a $$1,410$ balance on his Mastercard $($minimum payment of

$$20),$ a $$50$ balance on his Shell credit card $($balance due in $30$ days$),$ and a $$600$ balance on a personal line of credit $($ $$50$ monthly payments$).$

a$.$ Use Worksheet $7\mathrm{.}1$ to prepare an inventory of Leo's consumer debt.

b$.$ Find his debt safety ratio, given that his take$-$home pay is $$2,500$ per month. Round the answer to $1$ decimal place.

$\%$

c$.$ Would you consider this ratio to be good or bad?