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Present value calculator
Our present value calculator takes a designated amount of future money and helps you understand how much that money would be worth today. Keep reading to see how our present value calculator works.
How to use our present value calculator
To calculate present value with our calculator, follow these steps:
- Enter in the future value of the money.
- Enter in the number of periods.
- Enter in the annual interest rate.
- Click calculate.
How the present value calculator works
Our present value calculator essentially works backwards, taking a future amount of money and the interest rate you earned to get to that point, then telling you what amount you would have started with to arrive at that point. The two outputs that the calculator provides are present value and total interest.
Why should I use it?
The time value of money is an essential concept to understand, since one pound today will be worth a different amount a year from now, due to inflation. By seeing the present value of future money, you can better understand that time value, and also make more informed decisions about your finances.
What is present value?
Present value is the value of a sum of money right now, as opposed to a different value that this money will have in the future either through investment or inflation and interest.