Investing Basics

What Is Present Value?

Present value (PV) is today's value of an amount of money to be received in the future, calculated by discounting it at a chosen rate. PV = FV ÷ (1 + r)^n. A higher discount rate or a longer wait produces a lower present value.

Example

1,000 to be received in 5 years, discounted at 5% a year, has a present value of about 783.53.

Where It Is Used

Present value is used to compare payment options, value bonds and annuities, and evaluate projects.

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🔗 Related Terms

Future Value Time Value of Money Annuity Inflation

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.