Present Value Calculator

Formula

PV = FV × vⁿ where v = 1/(1+i)

Enter Values

Future Value ($) *

The future amount you will receive (face value, maturity value, or target amount). Must be positive.

Annual Interest Rate (%) *

The discount rate or required rate of return. This represents your opportunity cost or alternative investment return. Negative rates possible in unusual economic conditions.

Number of Years *

Time until future value is received. For days, divide by 365 (e.g., 90 days = 90/365 = 0.2466 years). For Canadian T-Bills, use actual/365 day count convention.

Results

Interpretation

For $100,000 T-Bill maturing in 90 days at 5% rate: Present Value (Purchase Price) = $98,808.16 | Total Discount = $1,191.84 | Discount Factor (v^n) = 0.988082. This is the fair price to pay today for $100,000 in 90 days.

How It Works

Present value answers: 'What amount today is equivalent to a specified amount in the future?' The discount factor v = 1/(1+i) represents the present value of $1 to be received in n periods. Essential for time value of money comparisons.

Key Points

Use for capital budgeting, bond pricing, and investment analysis.
Canadian T-Bills use interest-bearing; US T-Bills use discount basis.
Compare lump sum vs annuity, lottery payouts, legal settlements.
Assumes constant discount rate; does not include inflation separately.

Continue in this Category

Simple Interest Effective Interest Rate

References

Broverman, S.A. (2015). Mathematics of Investment and Credit (6th Edition). ACTEX Publications. Chapter 1, Section 1.2: Present Value and Discount, pages 17-20. Definition 1.6 (page 18): v = 1/(1+i). Equation 1.3 (page 18): PV = FV × vⁿ. Example 1.6 (page 19): Canadian T-Bill with actual/365 day count.