Present Value

Present Value is the current value of a future amount of money that has been discounted to account for the time value of money. In other words, it is the amount of money you need today to be able to receive a certain amount in the future.

For example, suppose you are offered $10,000 in 20 years. To determine the present value of that future amount, you have to discount it to account for the fact that the money will not be received until 20 years in the future.

The present value formula is as follows:

PV = FV/(1+r)^n

Where PV is the present value, FV is the future value of the amount, r is the discount rate, and n is the number of periods.