SOLUTION: You purchased a refrigerator at Sears for $2,500 (no sales tax added), and you decide to pay for it in 4 years. Sears' interest rate is 10%. What is the monthly payment that you ne

Algebra ->  Finance -> SOLUTION: You purchased a refrigerator at Sears for $2,500 (no sales tax added), and you decide to pay for it in 4 years. Sears' interest rate is 10%. What is the monthly payment that you ne      Log On


   

Question 1205636: You purchased a refrigerator at Sears for $2,500 (no sales tax added), and you decide to pay for it in 4 years. Sears' interest rate is 10%. What is the monthly payment that you need to pay?
Answer by ikleyn(52781) About Me  (Show Source):
You can put this solution on YOUR website!
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You purchased a refrigerator at Sears for $2,500 (no sales tax added),
and you decide to pay for it in 4 years. Sears' interest rate is 10%.
What is the monthly payment that you need to pay?
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Use the formula for the monthly payment for a loan

    M = P%2A%28r%2F%281-%281%2Br%29%5E%28-n%29%29%29


where P is the loan amount; r = 0.1%2F12 is the nominal interest rate per month;
n is the number of payments (same as the number of months in 4 years); M is the monthly paymemt.


In this problem  P = $2500;  r = 0.1%2F12;  n = 4*12 = 48.


Substitute these values into the formula and get for monthly payment

    M = 2500%2A%28%28%280.1%2F12%29%29%2F%281-%281%2B0.1%2F12%29%5E%28-48%29%29%29 = $63.41  (rounded).


Thus, the monthly payment is $61.41.    ANSWER


In total, you will have to repay  4*12*61.41 = 2,947.68 dollars in 4 years.


The difference $2,947.68 - $2,500 = $447.68 = $370,681.60  is the interest you pay for this loan.

Solved.