Present value: drag the wait
Drag the handle to set how long you wait for a future lump. The headline is what that lump is worth today at the stated rate. The default run is 10 years at 6 percent. Stretch the wait and today's value falls, because more compounding is being reversed.
Present value
$5,583.95
Due in 10 years
$10,000
A longer wait, or a higher rate, shrinks today's value of the same $10,000. Illustrative arithmetic, not a quote or advice.
In short
- Drag the handle right for a longer wait, left for a shorter one.
- Read the present value. That is today's price of the future lump, not the lump itself.
- Raise the rate slider and watch the same wait discount harder.
- Set the rate to zero: present value equals the lump, because nothing is being undone.
Discounting is compounding run backwards
A dollar later is not a dollar now whenever money can earn a rate. Present value undoes that growth. Hold the lump and the rate still, add years, and the divisor gets larger, so today's value gets smaller.
How present value works is the identity, with the present value calculator under the answer. A payment stream is the same formula applied to every payment and added up.
The rate is doing all of the work
Raise the rate and every future cash flow shrinks in today's money. Cut it and present value rises. At a zero rate nothing is being undone.
That sensitivity is duration's starting point. How bond duration works measures it for a coupon bond. On a single lump the whole present value sits at one date, so a rate move has nowhere to average.
NPV is the next step, not a synonym
Present value discounts inflows. Net present value subtracts what you pay today to buy them. NPV and IRR is that subtraction on a dated list. A bond is both terms at once: coupons as the stream, face as the lump at maturity.
Common questions
Why does a longer wait shrink today's value?
Because more periods of growth are being undone. The lump has not changed. The divisor has.
What rate should I type?
The rate that matches the risk of the cash flow. A safe cash flow discounted at a risky rate is understated. This picture will not pick the rate.
Is this a price I should pay?
No. It is today's value of a lump you typed, at a rate you typed. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.