A lump sum ten years out
$20,000 to be received in 10 years, discounted at 6%, is worth $10,992.65 today.
Present value calculator
This is an estimate for information only. It is not financial or investment advice.
Result
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How it works
A future lump sum is discounted by dividing it by (1 + rate) raised to the number of periods. A series of equal future payments — an annuity — is discounted payment by payment and summed, which has a closed-form shortcut used here.
Combining both lets you value something like a bond that pays regular coupons and returns its face value at the end, or a settlement offer paid partly now and partly in instalments.
Formulas used
Present value of a lump sum
PV = FV ÷ (1 + i)^n
Present value of an annuity
PV = PMT × (1 − (1 + i)^−n) ÷ i
- FV
- future lump sum
- PMT
- monthly payment
- i
- monthly discount rate
- n
- number of months
Worked examples
A lump sum plus monthly payments
The same $20,000 lump sum plus $300 a month for those 10 years is worth $38,014.69 today combined.
Assumptions and limits
- The discount rate is constant across the whole horizon.
- Payments are equal and made at the end of each month.
- No taxes or fees are subtracted from the amounts.
Frequently asked questions
What discount rate should I use?
A common choice is the return you could reasonably expect from investing the money elsewhere, or a bond yield of similar risk and duration — there is no single universally correct rate.
Why is present value always lower than the future amount?
Because money available today can be invested and grow; a rate of zero is the only case where present and future value are equal.
Can this value a bond?
Yes, approximately — treat the coupons as the monthly (or periodic) payment and the face value as the future lump sum, using the bond's yield as the rate.
What if I only have payments, no final lump sum?
Leave the future lump sum at zero — the result becomes the present value of an ordinary annuity.
Updated
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