Which of the following is true about the debt-to-income ratio?

Question

BlackTom AI · Accepted Answer

Here is a structured analysis of each answer option regarding the debt-to-income (DTI) ratio.

Option 1: 'Guidelines suggest that the debt-to-income ratio should be about 40%.' This statement asserts a specific guideline value. In reality, while lenders often use a target around 36% to 43% for front-end and back-end DTIs, there is no universal rule that the DTI should be exactly 40%, and guidelines vary by lender and loan type. Moreover, saying 'about 40%' is an oversimplification that does not capture the broader nuance across programs and borrower situations.

Option 2: 'The debt-to-income ratio is also known as the 10-70-20 guideline.' This is incorrect. The 10-70-20 guideline is a budgeting rule describing how to allocate take-home pay (10% savings, 70% needs, 20% debt repayment or other expenses). It is unrelated to the DTI, which is a lender-derived ratio comparing debt payments to gross monthly income.

Option 3: 'None of the answers provided are true.' Given that one of the options correctly describes the DTI, this statement would be false. At least one option aligns with the standard concept of DTI, so this cannot be the correct choice.

Option 4: 'The ratio measures the amount of monthly income that should be allocated to creditors to pay monthly debt payments.' This is a reasonable description of the DTI concept. The DTI ratio expresses the portion of monthly gross income that goes toward debt obligations (such as housing, loans, and other debt payments) and helps assess an individual’s ability to manage new debt. While the phrasing could be refined (DTI is typically the percentage of gross monthly income dedicated to debt payments), the core idea—that it represents the portion of income allocated to creditors for debt payments—is correct.

In summary: Option 4 accurately describes the debt-to-income ratio's purpose, while Options 1 and 2 present common misconceptions or mischaracterizations, and Option 3 denies a correct statement that does exist among the options.

FSOS 1301 (001) Quiz 1

Which of the following is true about the debt-to-income ratio?

查看解析

登录即可查看完整答案

类似问题

Which of the following is true about the debt-to-income ratio?

The '28/36 Rule' states that your housing expenses (mortgage, taxes, insurance) shouldn't exceed 28% of your gross monthly income and your total debt (credit cards, student loans, car loans) shouldn't exceed 36% of your gross monthly income.

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

Under the assumptions used in cost-volume-profit analysis, as the activity increases:

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单