Question 1

What is Present Value and why is it important?

Accepted Answer

Present Value (PV) is the current worth of a future sum of money, accounting for interest over time. It answers 'How much do I need to invest today to have a certain amount in the future?' This is crucial for retirement planning, investment goals, and financial planning.

Question 2

What's the difference between Future Value and Annuity modes?

Accepted Answer

Future Value mode calculates PV for a single lump sum (e.g., $50,000 in 5 years). Annuity mode calculates PV for a series of equal payments (e.g., $5,000/month for 20 years). Use Future Value for one-time goals, Annuity for regular income needs.

Question 3

How does interest rate affect present value?

Accepted Answer

Higher interest rates reduce the present value needed (money grows faster). Lower rates require more present value (money grows slower). For example, $50,000 in 5 years at 8% requires less today than at 4% because your money grows faster at 8%.

Question 4

What is the present value schedule?

Accepted Answer

The schedule shows year-by-year how your investment grows from present value to future value. It displays the starting value, interest earned each year, and ending value. This helps you visualize how your investment compounds over time.

Question 5

How do I use this for retirement planning?

Accepted Answer

Use Annuity mode. Enter your desired monthly retirement income, expected interest rate, and retirement duration. The calculator shows how much you need to save today (present value) to generate that income stream. This helps you plan your retirement nest egg.

Present Value Calculator (PV) - Time Value of Money

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