If I were Sears I would sue the publisher of this textbook for associating their name with such a fraudulent practice .
Anyway, according to this criminal plan ....
cost after sales tax = 1656.9
"add-on interest" = 1656.90(.12)(3) = 596.484
amount to be "financed" = 2253.384
monthly payment = 2253.384/36 = $62.594
Actual rate of interest: (not part of the question)
1656.90 = 62.564( 1 - (1+x)^-36)/x , where x is the monthly rate
Wolfram found x to be .0176 for an annual rate of 21.12 %
http://www.wolframalpha.com/input/?i=solve+1656.90+%3D+62.564%28+1+-+%281%2Bx%29%5E-36%29%2Fx
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 12% (add-on rate). If the refrigerator at Sears costs $1,578 plus 5% sales tax, and Karen and Wayne plan to pay for the refrigerator for 3 years, what is the monthly payment?
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