Present Value Calculator
Understanding Present Value
What is Present Value?
Present Value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It takes into account the time value of money - the idea that money available now is worth more than the same amount in the future.
Types of Calculations
- Single Amount: Future value of one payment
- Annuity: Series of equal payments
- Perpetuity: Endless stream of payments
Key Concepts
- Time Value of Money: Money's value changes over time
- Discount Rate: Required rate of return
- Compounding: Frequency of interest calculation
Present Value helps in making investment decisions by comparing the value of money at different points in time.
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Investment Tips
- Consider inflation effects
- Compare different interest rates
- Account for risk factors
- Review compounding frequency