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 15% (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.)
P = (Po*r*t)/(1-(1+r)^-t)
Po = 1598 * 1.05 = $1677.90
r = (15%/12)/100% = 0.0125 = Monthly % rate expressed as a decimal.
t = 3yrs * 12mo./yr = 36 Months.
Plug the above values into the given Eq and get:
P = 2093.94
Monthly Payment = P/t