The discount rate is the return that makes money today equivalent to money later. Investors use it to value future cash; savers can use it to see what rate turns their deposits into a target.
How to use the Discount Rate Calculator
- Present value
- Future value
- Term
- Periodic cash flow (deposit)
- Cash flow frequency
- Cash flow timing
- Compounding frequency
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the present value, future value, term, compounding and any regular cash flow with its frequency and timing.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Present value | Amount in your currency |
| Future value | Amount in your currency |
| Term | Units: years, months |
| Periodic cash flow (deposit) | Amount in your currency |
| Cash flow frequency | Choose one: Monthly, Bi-weekly, Weekly, Quarterly … |
| Cash flow timing | Choose one: End of each period, Beginning of each period |
| Compounding frequency | Choose one: Yearly, Semi-annually, Quarterly, Monthly … |
What each result means
- Periodic discount rate = rate(round([Term]×[Cash flow frequency]), 0 – [Periodic cash flow (deposit)], 0 – [Present value], [Future value], [Cash flow timing])×100
- Effective annual rate = ((1 + [Periodic discount rate]÷100)^[Cash flow frequency] – 1)×100
- Discount rate (nominal, with chosen compounding) = nomr([Effective annual rate]÷100, [Compounding frequency])×100
- Total cash flows = [Periodic cash flow (deposit)]×round([Term]×[Cash flow frequency])
Example values
How the main result changes when Present value changes and everything else stays at the example values above:
| Present value | Discount rate (nominal, with chosen compounding) (%) |
|---|---|
| 5,000 | 18.921 |
| 7,500 | 13.044 |
| 10,000 | 9.051 |
| 12,500 | 6.051 |
| 15,000 | 3.661 |
| 20,000 | -1.000e-8 |
Formula
Without cash flows: r = (FV ÷ PV)^(1 ÷ n) − 1With cash flows: solve PV × (1 + i)^N + CF × [(1 + i)^N − 1] ÷ i × (1 + i × timing) = FV for iWorked example
Inputs — Present value: $10,000; Future value: $20,000; Term: 8 years; Periodic cash flow (deposit): $0; Cash flow frequency: Yearly; Cash flow timing: End of each period; Compounding frequency: Yearly.
Results — Periodic discount rate = 9.0508 %; Effective annual rate = 9.051 %; Discount rate (nominal, with chosen compounding) = 9.051 %; Total cash flows = $0.00.
Frequently asked questions
What is a discount rate?
The rate used to convert future money into today's value.
How do I choose a discount rate for an investment?
Use your required return or cost of capital.
Is the discount rate the same as the interest rate?
Mathematically similar; the discount rate is applied backwards in time.
What formula does the Discount Rate Calculator use?
Without cash flows: r = (FV ÷ PV)^(1 ÷ n) − 1.