How this number is made
Present value is the amount that would grow into the future sum at the rate you type. The rate is the return you give up, or the rate a contract uses. It is not a fact about the future amount.
- Use a rate you could actually earn on a comparable risk, if you are deciding whether to take money now.
- Years are whole periods of that annual rate. Mid-year payments are not modeled.
Formula
Present value = future amount ÷ (1 + rate) ^ years.
Worked example
With the figures already in the form, present value is $12,548.25.
Questions
What rate should I use?
The opportunity you are comparing against. A Treasury and a private IOU should not share a rate. The page will not pick one.
Does this handle a stream of payments?
No. A stream is the annuity page. This is one amount on one date.