Future Business Leaders of America (FBLA) Business Calculations Practice Test

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Dive into the FBLA Business Calculations Test. Sharpen your analytical skills with multiple-choice questions and gain insights with detailed explanations. Excel in your exams!

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Jack's PITI is $950 per month. His gross monthly income is $3,600. What is his housing ratio?

24.6%
26.4%
30.6%
25.0%

The correct answer is: 25.0%

To determine Jack's housing ratio, which is also known as the front-end ratio, you calculate the percentage of his gross monthly income that goes toward his monthly PITI (Principal, Interest, Taxes, and Insurance). First, you take Jack's monthly PITI of $950 and divide it by his gross monthly income of $3,600. The formula is: Housing Ratio = (PITI / Gross Monthly Income) × 100 Substituting the numbers into the formula gives you: Housing Ratio = ($950 / $3,600) × 100 Calculating this yields: Housing Ratio = 0.2639 × 100 = 26.39% Rounding this to the nearest tenth of a percent results in approximately 26.4%. Thus, the housing ratio indicates that around 26.4% of Jack's gross monthly income is allocated to housing costs, which is a key metric for lenders to assess affordability.