Present Value Calculator
Compound interest run backwards: what a sum promised in the future is worth in today's money, at the discount rate you choose. The basis of every serious valuation.
What a future promise is worth in today's money
Money later is worth less than money now — by exactly the return the money could have earned meanwhile. Present value performs that translation at a discount rate you choose, and it is the foundation under bond pricing, pension valuation, legal settlements and every 'is this deal worth it' analysis worth its salt.
PV = FV ÷ (1 + r ÷ m)m × years
Example: $25,000 arriving in 10 years, discounted at 6% compounded monthly, is worth $13,741 today. Offered the choice between $14,000 now and that $25,000 promise, the arithmetic takes the cash — at a 6% discount rate. At 3%, the promise wins. The rate is the argument; this page just runs it honestly.
The discount rate is where judgment lives
Pick the rate that represents your real alternative: a safe yield for a safe promise, a higher rate for a shakier one. Almost every valuation dispute in finance is, underneath, a disagreement about this single input wearing a costume of formulas.
How this is calculated
The future amount is divided by the compounding factor (1 + r/m)^(m×years) — the exact inverse of the future-value computation, with the same nominal-rate convention. The 'discount' line is the gap between the future amount and its present value: the price of the wait at your rate.
Frequently asked questions
What discount rate should I use?
The return you could actually earn on comparable-risk money over the same period: a government-bond yield for a guaranteed promise, your portfolio's expected return for an investment comparison, a loan's rate for a debt decision.
Is a lottery lump sum just a present value?
Exactly one: the annuity-versus-lump-sum choice is the state offering you its discount rate. Comparing the two with your own rate tells you whose discounting favors you.
Does present value include risk?
Only through the discount rate you choose — a riskier promise deserves a higher rate, which lowers its PV. The risk adjustment is judgment, deliberately placed in your hands.
Why do pension buyout offers look small?
Because they are present values at the plan's discount rate, and decades of discounting shrink large future sums hard. Small is not the same as unfair — re-run the figure at your own rate before judging.
Embed this calculator
Writing about money — a blog, a school page, a community site? Put this calculator on your page, free: copy the code below and paste it where you want the calculator to appear. It stays up to date automatically — the small credit line underneath is all we ask in return.
CalcPrincipal