Which of the following Debt Coverage Ratios (DCR) would provide the greatest negative gearing in a property investment? a. 1.1 b. 0.8 c. 0.9 d. 1.2 e. 1

The Debt Coverage Ratio (DCR) is a measure of the cash flow available to pay current debt obligations. The lower the DCR, the less cash flow is available to cover debt, which can lead to negative gearing. Negative gearing occurs when the cost of owning a property outweighs the income it generates.

Here are the steps to answer the question:

1. Understand the concept of DCR: DCR is calculated by dividing the property's net operating income by the total debt service. A DCR less than 1 indicates that the income generated by the property is not sufficient to cover its debt obligations, leading to negative gearing.

2. Compare the given DCR values: The DCR values provided in the options are 1.1, 0.8, 0.9, 1.2, and 1. The lower the DCR, the higher the negative gearing.

3. Identify the lowest DCR: Among the given options, 0.8 is the lowest DCR.

Therefore, a Debt Coverage Ratio (DCR) of 0.8 (option b) would provide the greatest negative gearing in a property investment.