How to discount a future payment
Choose a rate and a compounding convention.
1
Enter the future amount
Use the cash flow expected at the later date.
2
Set the discount rate
Use the return available on a comparable-risk investment.
3
Choose compounding
Match the convention used by the account or contract.
What does this tool do?
Money available later is worth less than money today because it could be invested. Present value applies a discount rate over the waiting period.
The Formula
PV = Future value ÷ (1 + r ÷ m)^(n × m), or FV ÷ e^(r × n) for continuous compoundingFrequently Asked Questions
What discount rate should I use?
A rate that reflects the opportunity cost and risk of the cash flow. A safe alternative return is a conservative choice.
Does inflation count?
Use a real rate if the future amount is in today money. A nominal amount should use a nominal rate.