Present Value of a Future Sum Calculator

Use the Present Value of a Future Sum Calculator to calculate the present value of a future sum on money using known interest rate of an investment and period of the investment. This is particularly useful if you are saving to purchase a specific product, a car for example, you can calculate how much you need to save each month in order to pay for the car in 1 years time. You can then compare this to the cost of purchasing the car with finance to see how much you save on interest payments.

Present Value of a Future Sum Calculator
Future Value:
Number of Periods:
Interest Rateper Period: %
Compounding:
Present Value of a Future Sum Calculator Results
Present Value of a Future Sum:8883.50
[ 1 Votes ]

Present Value of a Future Sum: Current value of the future sum of money

Present Value of a Future SumCalculator. This image provides details of how to calculate the Present Value of a Future Sum using a good calculator, a pen and notepad. By using the Present Value of a Future Sum formula, the Present Value of a Future Sum Calculator provides acalculation of the present value of a future sum on money using known interest rate of an investment and period of the investment.

Time is money. People have been quoting this for generations to teach the value of time. Present value of a future sum literally means this. Imagine that you have won a cash prize of 10k and you are given two options to claim this prize. Option A is to get the prize money right away and, Option B is to claim the prize money after a year.

Which option would you choose? Anyone with a decent common sense will go for the first option. Why wait for a year when we can have the money right now? Also, we can use this money to earn interest for a year.

The present Value of a Future Sum Calculator

This future sum calculator by iCalculator has been designed in a way that will help you do the complex calculations with just a few entries. If you want an approximate amount of money for something you want to buy in the future, you may use this calculator to figure out how much money you need right now to meet the target amount. Period of time is essential for these calculations. Details required to be entered for the calculations are explained below:

  • Future value: The very first thing you need to know is how much money do you actually need at the end of the selected time period.
  • Number of Periods: This can be days, weeks, months or years as per your requirement. It should be in line with the other details that you input for the calculation.
  • Interest rate per period: What is the interest rate that you are expecting per period on your current amount.
  • Compounding: This is the number of times compounding occurs per period. If a period is a year and compounding of interest is annual then this value will be = 1, for quarterly = 3 and so on.

After entering all these values, you will have the present value of a future sum as a result. This means the amount you need to save in a year (or regular intervals selected) to get to the future value.

Benefits of this Calculator

The calculator has been created to make your calculations easy, so it helps you in many ways, like:

  • The calculator is online, easy to use with just a few basic entries required to know the present value of the future sum.
  • Knowing the present value will help you realize how much you need to save thus enabling you to save more.
  • The calculator gives you real time numbers and you can use them to plan ahead and save money according to your needs.
  • Calculations will show you how much interest you need to earn if you have limited savings. You may choose the most suitable plan of investment to get to the future value of the amount you need.

In short, the present value of a future sum calculator is a really good tool for all your savings and investment and can help you reach your goals.

Factors that impact Present Value

Calculating present value of a future sum is a very good technique. However, there are some limitations that should be kept in mind before deciding anything of a permanent nature.

Present value may not always be the best option for future sum. Let's say that you have a choice of getting paid 1,000 now, and 1,100 after a year. Following the present value of a future sum formula we might opt to be paid now assuming we could access 3% interest rate for a year. Let's have a look at the calculation:

1,000 x 3% = 1,030

This shows that opting for a payment after a 1 year would be a better option in this case.

Let's say you are saving to purchase some product that you don't want to buy on loan to avoid paying interest. Researching the market for 0% financing would be a better option here. You would not need to wait for a period of time to purchase the product as you would not be paying any interest even at present.

Saving for a particular period of time with fixed interest payments may get affected by inflations at times. In this case as well, paying a low interest rate on a lower price of a product would be more beneficial. Rather than paying a zero interest on a higher price, because the price may have risen more than the value of interest payments in that particular period of time.