# Present Value (PV) Calculator

LAST UPDATE: October 3rd, 2019

### What is Present Value (PV)?

Present Value (PV) is the value of future money in today’s dollars. It uses a future value of money and a rate of return to calculate today’s value.

A common question that present value addresses is “how much money do I need right now to have a savings goal in the future?”

There are also present value calculations for an annuity, an annuity due, a perpetuity, and a growing perpetuity.

### PV Formula – How Present Value is calculated

$\text{Present Value} = \frac{\text{Future Value}}{(1 +\text{Rate of Return})^\text{Number of Periods}}$

Where:

• Future Value” is a sum of money in the future.
• Rate of return” is a decimal value rate of return per period (the calculator above uses a percentage). A return of “2.2%” per year would be calculated as “0.022.”
• Number of Periods” are the number of compounding periods.

### Example calculations

What is the present value of $2,000, 10 years from now, assuming a 2.2% annual rate of return? $\text{Present Value} = \frac{2,000}{(1 + 0.022)^{10}}$ $\text{Present Value} = \frac{2,000}{1.022^{10}}$ $\text{Present Value} = \frac{2,000}{1.243108}$ $\text{Present Value} = 1,608.87$ What is the present value of$1000, 48 months from now, assuming a 1% monthly rate of return?

$\text{Present Value} = \frac{1,000}{(1 + 0.01)^{48}}$

$\text{Present Value} = \frac{1,000}{1.01^{48}}$

$\text{Present Value} = \frac{1,000}{1.612226}$

$\text{Present Value} = 620.26$

### What is the difference between future value (FV) and present value (PV)?

Future value is the value of money at a future date, and present value is the value at today’s date.