Question

Teagan wants to buy a new refrigerator. The refrigerator costs $2250.

Teagan decides to finance the refrigerator for 24 months at an APR
of 12.5 %. Determine Teagan's monthly payment.

Answer 1

Teagan's monthly payment for the refrigerator at a finance rate of 12.5% APR over 24 months will be approximately $100.72.

Step-by-step explanation:

Teagan is looking to finance a new refrigerator with a price tag of $2250 at an APR of 12.5% over 24 months. To determine Teagan's monthly payment, we can use the formula for calculating the fixed monthly payment on an installment loan, which is generally given as:

M = P * (J / (1 - (1 + J)^(-N)))

Where:

• M is the total monthly payment,
• P is the principal amount (the initial amount of the loan),
• J is the monthly interest rate,
• N is the number of months over which the loan will be repaid.

In this case, P = $2250, the APR is 12.5%, and N = 24 months. First, convert the APR to a monthly interest rate by dividing by 12: J = 12.5% / 12 = 1.0417% per month or 0.010417 in decimal form.

The formula now becomes:

M = 2250 * (0.010417 / (1 - (1 + 0.010417)^(-24)))

Calculating this gives us:

M = 2250 * (0.010417 / (1 - 1.010417^(-24)))

M = $100.72

Therefore, Teagan's monthly payment for the refrigerator will be approximately $100.72.