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Present Value Calculator
Present Value Calculator
Determine the current worth of a future sum of money
$0.00
Present Value
The amount you'd need to invest today
Total Interest
$0.00
Discount Factor
0.00
Effective Rate
0.00%
Present Value vs Future Interest
About the Present Value Calculator
Present value tells you how much a future sum is worth today. It is the basis of pricing bonds, valuing investments and comparing offers paid at different times.
How to use the Present Value Calculator
- Enter the Future Value ($), Interest Rate (%) and Periods (Years).
- Choose the Compounding Frequency.
- Press Calculate Present Value.
Formula and method
PV = FV ÷ (1 + r ÷ n)^(n × t)
Worked example
To have $50,000 in 10 years with a 6% annual return, you need to invest 50,000 ÷ 1.06¹⁰ = $27,920 today.
Discounting a future sum. 10,000 due in 5 years, discounted at 5% a year, is worth 10,000 ÷ 1.055 = 7,835.26 today.
When to use the Present Value Calculator
- Finding out what a future payment or prize is worth in today's money.
- Comparing a lump sum today against payments over time.
- Valuing a bond or an annuity.
Common mistakes to avoid
- Using a discount rate that is too low or too high without a reason.
- Mixing annual rates with monthly periods.
Tips
- A higher discount rate lowers present value.
- Use present value to compare a lump sum now with payments later.
Frequently Asked Questions
Use the return you could earn on a similar-risk alternative, or your required rate of return.
Because you can invest it and earn a return, and because inflation reduces future buying power.
Use the return you could expect from an alternative investment of similar risk.