A dollar today is worth more than a dollar tomorrow because it can earn interest. The time value of money is the foundation of loans, investments, pensions and valuation.
How to use the Time Value of Money Calculator
- Present value
- Annual interest rate
- Term
- Compounding frequency
- Every result field is editable: type into Future value and Present value plus every other field update to match.
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the present value, interest rate, term and compounding. Type a future value into the result to find the present value.
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 |
| Annual interest rate | In % |
| Term | Units: years, months |
| Compounding frequency | Choose one: Yearly, Semi-annually, Quarterly, Monthly … |
What each result means
- Future value = [Present value]×(1 + effr([Annual interest rate]÷100, [Compounding frequency]))^[Term]
- Interest = [Future value] – [Present value]
- Growth factor = (1 + effr([Annual interest rate]÷100, [Compounding frequency]))^[Term]
Example values
How the main result changes when Present value changes and everything else stays at the example values above:
| Present value | Future value |
|---|---|
| 500 | 909.7 |
| 750 | 1,364.55 |
| 1,000 | 1,819.4 |
| 1,250 | 2,274.25 |
| 1,500 | 2,729.1 |
| 2,000 | 3,638.79 |
Formula
FV = PV × (1 + r ÷ m)^(m × t)Continuous: FV = PV × e^(rt)PV = FV ÷ (1 + r ÷ m)^(m × t)Worked example
Inputs — Present value: $1,000; Annual interest rate: 6 %; Term: 10 years; Compounding frequency: Monthly.
Results — Future value = $1,819.40; Interest = $819.40; Growth factor = 1.8194.
Frequently asked questions
What is the time value of money?
The idea that money now is worth more than the same amount later.
How do I find present value from future value?
Divide by (1 + r/m)^(mt) – or type FV into the result field.
Why does compounding frequency matter?
More frequent compounding means slightly faster growth.
What formula does the Time Value of Money Calculator use?
FV = PV × (1 + r ÷ m)^(m × t).