Present Value Calculator
Present value calculator is the current value of a stream of cash flows or a future payment rate of return. Present value is equal to Future Value divided to number value 1 added Interest rate(%).
let us consider,
- PV = present value
- FV = future value
- r = interest rate
It applies compound interest, which means that interest increases exponentially over subsequent periods.
If you read the previous paragraph you already know that to estimate present value you need to:
- Determine the future value. In our example let’s make it $200
- Determine a periodic rate of interest. Let’s say 7%
- Determine the number of periods. Let’s make it 2year
- Divide the future value by (1+rate of interest)^periods
In our example it will look like this:
The answer is present value = 174.69$