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Present value
Present value
Present value is the current value of some amount of money that will be received in the future.
Formula
Formula
Present value factor
Present value factor
The term below, from the formula above, is called the present value factor. Using this term, a present value table can be created. The table, then, can be used to solve future value questions instead of using the formula.
Future value vs. present value
Future value vs. present value
In a future value calculation, you are adding interest. What will some dollar amount be worth in the future if I can earn interest on that dollar amount?Â
In a present value calculation, you are are removing interest. What is some future payment, which includes interest that will be earned, worth to me today?
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