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The Present Value of Your Dreams


  • Present value is the current value of a future sum of money, given a specified rate of return.
  • The present value formula is PV=FV[1/(1+i)n]
  • PV stands for present value—It is the unknown amount; the amount solved for in the calculation. It's the amount we need today in order to reach a future goal.
  • FV stands for future value. It's the amount we want to have in the future. If you want, think of it as the financial goal you hope to achieve.
  • i stands for the interest rate, which has a great effect on present value. The interest rate in our formula must be written in decimal form: for example, 3% is 0.03.
  • n stands for the number of payments of interest.