Glossary

The Present Value of Your Dreams

#### Summary

- 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.