Investing term

What is Present value (PV)?

What a future amount of money is worth today, after applying the discount rate.

Present value (PV) is what a future sum of money is worth today, once you discount it for the time and risk involved in waiting. A dollar later is worth less than a dollar now, because today's dollar can be invested. PV is the engine behind valuing bonds, stocks, and any stream of future cash — it translates tomorrow's money into today's terms.

For example

At a 10% discount rate, $1,100 due in a year has a present value of about $1,000 — the amount you'd accept today instead of waiting.

Present value (PV) is taught hands-on in Stage 15 — Valuation for Investors.

See the lesson →

Related terms

Book valueTotal assets minus total liabilities — the accounting net worth of the business.DCF (discounted cash flow)Estimate intrinsic value by adding up the present value of every future cash flow the business produces.Discount rateThe annual rate used to translate future dollars back into today's dollars in a DCF.Dividend yieldAnnual dividend per share ÷ share price. The cash income the stock pays out as a percentage of price.
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