Present value basics
The present value formula is used to determine what amount of money you would need to invest today in order to have a certain amount in the future, allowing for different interest rates and periods.
This formula is commonly used in corporate finance and banking, but is equally useful in personal or household financial calculations. Given a projected or desired future value of money, an interest rate and a number of interest periods, the present value calculator can compute the present value of that money, or the amount you would need to save or invest in your chosen financial instrument in order to achieve that future value. The effects of compound interest—with compounding periods ranging from daily to annually—may also be included in the formula. Plots are automatically generated to show at a glance how present values could be affected by changes in interest rate, interest period or desired future value.