Present Value Calculator
Do you know that the total of future investment returns that are discounted at a given level of expected return is used to determine the present value (PV)? Yes! This is the value of money in today's rupees that you expect to get from future income.
Yes! Before we get into the discussion of how the present value calculator works, let us discuss what is actually meant by the present value:
What is Present Value?
The concept of present value is applied to financial modelling, stock valuation, bond pricing, and the evaluation of various investment options.
To determine if an investment is worthwhile today, the investor computes a present value from the projected cash flow.
Because prices of goods and services grow over time due to inflation, the value of money decreases because what is worth now might not be worth the same tomorrow.
PV calculations ensure that the inflationary impact is computed from the expected rate of return or the inflation rate.
Present Value Formula
The formula for calculating the Present Value is-
Present Value= Future Value/(1+Interest Rate)^Number of Period
Let us explain this formula with the help of an example:
After three years, Suppose Mr X wants Rs. 10,000. He is interested in a certain investment with a 4 per cent annual interest rate. How much does he need to invest right now to get the desired return?
So, the present value= 10,000/ (1+ 0.4) ^3 = 10,000/ (1.4) ^3= Rs. 8,889.96
Thus, we can say that Mr X will have to invest Rs. 8,889.96 to get Rs. 10,000 after three years.
Isn't the formula too complicated? We also thought so! So, for such difficult calculations, Elearnmarkets has developed a Present Value Calculator Online to make the calculations easy.
Value Calculator Online
In Elearnmarkets Present Value Calculator Online, we need to enter the following inputs.
- Future Value of Investment
- Number of years
- Expected Annual Inflation Rate
After entering, click on the "Calculate Now", and we will get the amount as follows:
Present Value Calculator Benefits
Below are the benefits of using the Present Value Calculator
- You can evaluate the potential investment returns with the Elearnmarkets Present Value Calculator.
- It assists you in making the optimal investment decision in light of your financial objectives and risk tolerance.
- It aids in the finest annuity plan selection.
- The price of an investment can be estimated.
- It aids in calculating the present value of retirement objectives.
Now that we know what is Present Value, how does it work and how to use the Present Value Calculator Online, let us discuss some FAQs about the same:
How can we calculate the present value?
The future value FV is divided by a factor of 1 + I for each interval between the present date and the future date in the present value formula, PV=FV/(1+i) n.
What is the present value of receiving $10,000?
The present value of $10,000, if you were to receive it today, would obviously be $10,000 since that is what your investment would yield you right now if you were to use it.
How can we find the present value of future payments?
Two values—interest rate and duration—are required to calculate the present value of a future sum.
How can we calculate PV in Excel?
The current worth of an anticipated future cash flow stream is known as the present value or PV. Using Microsoft Excel, the present value may be estimated rather rapidly. PV can be calculated in Excel using the formula =PV (rate, nper, pmt, [fv], [type]).