Answer:
Option A.
Step-by-step explanation:
Annual income = $86,250
Monthly income = [tex]\frac{\$86,250}{12}=\$7,187.5[/tex]
According to the 28/36 rule:
1. A household should spend no more than 28% of its gross monthly income on total housing expenses.
2. No more than 36% on all debt, including housing-related expenses and other recurring debt service.
36% - 28% = 8%
It means maximum allowable recurring debt is 8% of monthly income.
Maximum allowable recurring debt = [tex]7,187.5\times \frac{8}{100}[/tex]
= $575
Therefore, the correct option is A.
