Question

Karen and Wayne need to buy a refrigerator because theirs just broke. Unfortunately, their savings account is depleted, and they will need to borrow money in order to buy a new one. Sears offers them an installment loan at 16% (add-on rate). If the refrigerator at Sears costs $1,540 plus 5% sales tax, and Karen and Wayne plan to pay for the refrigerator for 3 years, what is the monthly payment

Answer 1

The monthly payment would be $53.14.

Step-by-step explanation:

Here, it is said that Sears offered them an installment loan at 16% (add-on rate). If the refrigerator at Sears costs $1,578 plus 5% sales tax. Therefore, for 3 years.

5% of $1578 is $78.90

total amount borrowed is 1578 + 78.90 = $1656.90

Sears charges 16% to borrow the money.

16% of 1656.90 = 265.10

total amount is 1656.90 + 256.10 = $1913

there are 36 months in 3 years so

the monthly payment = 1913 / 36 = $53.14.