Find out what a future sum of money is worth today, given a discount (interest) rate and a compounding frequency.
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Enter the future amount you expect to receive or need, the annual discount rate that reflects the return you could otherwise earn, the number of years until that amount arrives, and how often the rate compounds.
Present value answers the question: how much would I need today to end up with a certain amount in the future, given a specific rate of return? The formula is PV = FV / (1 + r/n)n×t, where r is the annual rate, n is the compounding frequency per year, and t is the number of years.
Money today is worth more than the same amount in the future because it can be invested and earn a return. The discount rate captures that opportunity cost.
Use a rate close to what you could realistically earn elsewhere with similar risk — a savings rate, a bond yield, or an expected investment return.
Common questions, answered.
PV = FV / (1 + r/n)^(n×t), where FV is the future value, r is the annual discount rate, n is the number of compounding periods per year, and t is the number of years.
Use a rate that reflects what you could reasonably earn on an alternative investment of similar risk over the same period, such as a savings account rate or expected market return.
Because money available today can be invested to grow, a future sum is discounted back to reflect that lost opportunity to earn a return in the meantime.
Yes, especially over longer time periods and higher rates. More frequent compounding produces a slightly lower present value for the same nominal annual rate.