Eric Jones develops computer software for a major company. Eric's salary and bonuses total $82,000, but he pays $29,233 in income and social security taxes. If Eric's annual debt repayments are $33,620, what is his debt service-to-income ratio?
36%
To find Eric's debt service-to-income ratio, we need to determine his annual income and his annual debt service.
1. First, let's calculate Eric's annual income:
Annual income = Salary + Bonuses
Annual income = $82,000
2. Next, we need to determine Eric's annual debt service:
Annual debt service = Annual debt repayments
Annual debt service = $33,620
3. Now we can calculate the debt service-to-income ratio:
Debt service-to-income ratio = (Annual debt service / Annual income) * 100
Substituting the values we have:
Debt service-to-income ratio = ($33,620 / $82,000) * 100
Calculating this expression:
Debt service-to-income ratio ≈ 41.02%
Therefore, Eric's debt service-to-income ratio is approximately 41.02%.