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Time Value of Money (TVM) Calculator

General Time Value of Money (TVM) calculator.

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Assumptions

  • Calculated locally from the inputs shown in this report.

Sensitivity preview

Known Amount (PV/FV) -10%: Calculated Value $1,466.01

Known Amount (PV/FV) Current: Calculated Value $1,628.89

Known Amount (PV/FV) +10%: Calculated Value $1,791.78

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About this Finance Calculator

The Time Value of Money (TVM) is the fundamental concept of finance: money available now is worth more than the same amount in the future due to its potential earning capacity. This tool lets you solve for Future Value (compound interest) or Present Value (discounting).

How to use this calculator

  1. Select Solve For: FV (Future Value) or PV (Present Value).
  2. Enter the Amount (Principal or Future Goal).
  3. Enter the Interest Rate and Number of Years.

Accuracy and testing

Review formula sources, default test cases, assumptions, unit handling, rounding rules, and changelog for this calculator.

View accuracy page

How this calculator works

Formulas: • Future Value: FV = PV * (1 + r)^n • Present Value: PV = FV / (1 + r)^n Where r is the rate and n is the number of periods.

Inputs explained

Present Value (PV)

The current worth of a future sum of money given a specific rate of return.

Future Value (FV)

The value of a current asset at a specific date in the future based on an assumed rate of growth.

Rate

The interest rate or discount rate per period.

Example scenarios

Future Growth

If you invest $1,000 today (PV) at 5% for 10 years, it grows to $1,628 (FV).

Discounting

If you need $1,000 in 5 years (FV) and can earn 6%, you need to invest $747 today (PV).

Key Features

  • Two-way calculation (PV <-> FV)
  • Instant results
  • Simple Annual Compounding

Things to Keep in Mind

Assumes annual compounding. Does not handle regular payments (PMT) like an annuity calculator.

Tips & Best Practices

  • Use PV to determine if a future lump sum payment is better than taking a smaller amount of cash today.
  • Inflation acts as a negative interest rate in TVM calculations for purchasing power.

Glossary of Terms

Discounting
The process of determining the present value of a payment or a stream of payments that is to be received in the future.
Compounding
Generating earnings on an asset's reinvested earnings.

Frequently Asked Questions

Why is money today worth more?
Because money today can be invested to earn interest. Additionally, inflation erodes the purchasing power of money over time.
What is 'n' in the formula?
'n' represents the number of compounding periods. If computing annually for 5 years, n=5. If monthly, n=60.