NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
Mr. Rohan Mehta has monthly take-home pay of Rs 1,00,000. His monthly outgoings are: home loan EMI Rs 25,000, car loan EMI Rs 10,000, and personal loan EMI Rs 5,000. Using the ratio of total monthly loan EMIs to monthly take-home pay (the debt service ratio), what is his ratio?
The debt service ratio is 40%. Total monthly EMIs are Rs 40,000 (25,000 plus 10,000 plus 5,000), and dividing by monthly take-home pay of Rs 1,00,000 gives 0.40. All loan obligations must be included in the numerator.
- A25%
- B30%
- C35%
- D40%Correct
Explanation
Total EMIs = 25,000 + 10,000 + 5,000 = Rs 40,000. Ratio = 40,000 / 1,00,000 = 40%. Counting only the home loan gives 25%, and omitting the personal loan gives 35%, both of which ignore some debt obligations.
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