Determine the current value of a series of future payments. This tool helps you understand how much a future stream of income is worth today, considering a specific discount rate.
$7721.73
This is the value in today's dollars of receiving $1,000 every year for 10 years, discounted at a 5% annual rate.
| Year | Payment | PV Factor | Present Value of Payment |
|---|---|---|---|
| 1 | $1,000 | 0.9524 | $952.38 |
| 2 | $1,000 | 0.9070 | $907.03 |
| 3 | $1,000 | 0.8638 | $863.84 |
| 4 | $1,000 | 0.8227 | $822.70 |
| 5 | $1,000 | 0.7835 | $783.53 |
| 6 | $1,000 | 0.7462 | $746.22 |
| 7 | $1,000 | 0.7107 | $710.68 |
| 8 | $1,000 | 0.6768 | $676.84 |
| 9 | $1,000 | 0.6446 | $644.61 |
| 10 | $1,000 | 0.6139 | $613.91 |
The Present Value (PV) of an annuity is a fundamental concept in finance that helps you evaluate the worth of a stream of equal payments received over a future period. The core idea is the time value of money, which states that a dollar today is worth more than a dollar tomorrow. This is because a dollar received today can be invested and earn interest, growing its value over time.
This calculator applies this principle by "discounting" each future payment back to its value in today's terms. The discount rate you enter represents the rate of return you could otherwise earn on an investment with similar risk. A higher discount rate means future payments are worth less in today's dollars.
By using this tool, you can make more informed financial decisions by comparing the value of different investment opportunities that offer payments over time.