Computing the present value of a series of cash flows
Given loan interest rate = 8%
bank saving interest rate = 5%
Given the following yearly cash flows with zero initial capital:
$ -1,000 $ 900 $ 800 $ -1,200 $ 700
My teacher gives the answer of the future value of these cash flows at the beginning of the fifth year:
(((-1000*1.08 + 900) 1.08 + 800) 1.05 -1200 )*1.08 + 700
Now, he asked me to compute the present value of $ 90.7504.
I really don't know how to do since different loan interest rate and saving interest rate are given.
He also said that it is incorrect to simply discount $ 90.7504 by (1+5%)^4
Can anyone help?(Angry)