Answer: $688.17
Explanation:
He has to pay $60 every month on the first day or a lump sum.
The lump sum will be the present value of monthly payments.
This is a stable Cashflow and so is an Annuity and because it is done on the first day of the month it is an Annuity due.
Calculating present value of annuity due is;
= Annuity + Annuity (( 1 - ( 1 + r) ^ -(n - 1)) / r)
= 60 + 60 (( 1 - ( 1 + 0.833%)-¹¹) / 0.833%) )
=60 + 60* 10.4695
= $688.17
Note: interest rate must be divided into 12 to make it monthly rate.
=10%/12
= 0.833%
