Homework#5: calculating debt safety ratio

Use worksheet 7.1. Every six months, Leo Perez takes an inventory of the consumer debts he has outstanding.  His latest tally shows that he still $4,000 on a home improvement loan (monthly payments or $125); he is making $85/m payments on a personal loan with a remaining balance of $750; he has a $2,000 secured, single-payment that ‘s due late next year; he has a $70,000 home mortgage on which he’s making $750/m payments; he still owes $8,600 on a new car loan (monthly payments of $375): and he has $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his shell credit card ( balance due in 30 days ), and $1,200 balance on a personal line of credit ($60 monthly payment).

Use worksheet 7.1 to prepare an inventory of Leo’s consumer debt.  Find his debt safety ration, given that his take-home is $2500/m. Calculate a 5% savings of take home pay. Would you consider this ratio ratio to be good or bad? Explain.

 
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