Chapter 8 - Personal Finance - Chapter Summary, Review, and Test - Review Exercises - Page 572: 68

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(a) Amount spent on mortgage payments can be computed by multiplying the gross annual income to the maximum percent spent on the mortgage. Compute the amount spent on mortgage payments by substituting the values in the formula as mentioned below: \[\begin{align} & \text{Amount spent on mortgage payments}=\text{Gross annual income}\times \text{maximum percent spent} \\ & \text{on mortgage} \\ & =\$4,500\times0.28\\&=\$1,260\end{align}\] Hence, the maximum amount spent on mortgage payments in a month is \[\$1,260\] (b) Amount spent on debts payments can be computed by multiplying the gross annual income to the maximum percent spent on the debts. Compute the amount spent on debts payments by substituting the values in the formula as mentioned below: \[\begin{align} & \text{Amount spent on debts payments}=\text{Gross annual income}\times \text{Maximum } \\ & \text{percent spent on debts} \\ & =\$4,500\times0.36\\&=\$1,620\end{align}\] Hence, the maximum amount spent on total debts in a month is \[\$1,620\]. (c) Amount spent on mortgage payments can be computed by multiplying the maximum amount spent to the actual percent spent on the mortgage. Compute the amount spent on mortgage payments by substituting the values in the formula as mentioned below: \[\begin{align} & \text{Amount spent on mortgage payments}=\text{Maximum amount spent}\times \text{Actual percent} \\ & \text{spent on mortgage} \\ & =\$1,260\times0.80\\&=\$1,008\end{align}\] The amount spent on the mortgage payment is further used to compute the maximum amount spent on other debts in a month by substituting the values in the formula as mentioned below- \[\begin{align} & \text{Maximum amount spent on other debts}=\text{Maximum amount spent on total debts}-\text{Amount } \\ & \text{spent on mortgage payments} \\ & =\$1,620-\$1,008\\&=\$612\end{align}\] Hence, the maximum amount spent on other debts in a month is \[\$612\].