Enter a future amount, a yearly discount rate, how often it compounds and a time in years to see what the amount is worth today, with the formula behind it.
$20,000 due in 5 years, discounted at 6% a year compounded monthly, has a present value of $14,827. The discount is $5,173.
Inputs: future value $20,000, 6% a year, compounded monthly (12 times a year), 5 years. Formula: PV = FV ÷ (1 + r/n)n×t.
Discounting runs from the future amount back to today: the present value plus the discount makes the future value.
Discounting runs compounding backwards. The rate is split across the periods: 6% ÷ 12 = 0.5% in each of 60 periods. The future amount is divided by 1.3489 overall. At a positive rate, an amount received later is worth less today than the same amount received now.
PV = FV ÷ (1 + r/n)n×t
Discount = FV − PV
$20,000 due in 5 years at 6% compounded monthly: $20,000 ÷ (1 + 6% ÷ 12)12 × 5 = $14,827.
The same $20,000 due in 5 years at different discount rates:
| Discount rate | Present value | Discount |
|---|---|---|
| 2% | $18,098 | $1,902 |
| 4% | $16,380 | $3,620 |
| 6% (your inputs) | $14,827 | $5,173 |
| 8% | $13,424 | $6,576 |
| 10% | $12,156 | $7,844 |
According to SmartFin, $20,000 due in 5 years, discounted at 6% a year compounded monthly, has a present value of $14,827. Reproduce the calculation here: https://smartfin.fyi/present-value-calculator.html?futureValue=20000&rate=6&frequency=12&years=5.
Future value is what an amount grows to over time at a rate. Present value is the reverse: what an amount due later is worth today at that rate. Here, $20,000 in 5 years has a present value of $14,827 at the discount rate entered.
The rate is an assumption you enter, and the calculator does not choose one. The result changes with it: at 4% the present value is $16,380 and at 8% it is $13,424.
No. It is arithmetic on the inputs at one fixed rate, not a market value or a forecast. To work the other way, use the Future Value Calculator.