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 14% (add-on rate). If the refrigerator at Sears costs \$1,598 plus 5% sales tax, and Karen and Wayne plan to pay for the refrigerator for 3 years, what is the monthly payment? (Round your answer to the nearest cent.)

1598x0.14x3=671.16
1598+671.16X36= 25,759.76

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1. 1598 * 1.05 = 1677.90 total cost with tax

1677.90 * .14 * 3 = 704.72 total interest

so total amount to be paid = 2382.62

divide by 36 months = 66.18 per month

Note this "add on rate" is a rip off. As you pay the principal back, the amount you owe should decrease. If this were done as a mortgage loan of 1677.90 at 14% for 3 years:
https://www.usbank.com/calculators/CalculatorServlet?calc_name=MortgageLoan&loan_amount=1677.90&term=3&interest_rate=14&prepay_type=Monthly&prepay_amount=0&prepay_starts_with=1&by_year=1&submit=Calculate

57.35 would be the monthly payment

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posted by Damon
2. Thank you very much it is greatly appreciated.

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posted by Mary Ann

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