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Calculate the gross service debt ratio

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Question - Amy and Paul are a young married couple with a cat, but no children. They are currently renting an apartment, but are considering buying a house. They have created the following budget based on the house they hope to purchase.

Amy & Paul's Budget Combined Net Income $4,142.00

Expenses Mortgage $1,205.68

Property Tax $265.98

House Insurance $36.42

Electricity $100.00

Natural Gas Heating $50.00

Food $600.00

TV/Phone/Internet $125.00

Clothing $200.00

Car Loan Payments $745.52

Car Insurance $212.63

Gasoline $75.00

Life Insurance $45.00

Travel Fund $200.00

Gifts $60.00

Total Expenses $3,921.23

Income - Expenses $220.77

List any expenses that you feel have been omitted. Revise the budget to include these expenses. If necessary, reduce discretionary expenses so that income still exceeds expenses.

The combined gross annual income of Amy and Paul is $64,800.

Calculate both the Gross Service Debt and Total Service Debt ratios. According to these ratios, is this house affordable for Amy and Paul?

When Erica was born, her parents opened an education savings plan. They deposit $100 at the end of each month into an account that earns 8%/a, compounded monthly. Find the account balance on Erica's 18th birthday. How much interest is earned in total?

Reference no: EM133035607

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