What is a Present Value?
A Present value is where we have a sum of money in the future and we want to know what it would be worth in today’s dollars.
The future value of a sum is what a sum invested now will be worth in the future. This assumes the sum is invested at a nominated interest rate.
Because we could invest the sum now at todays interest rates the present value is less than the future value.
Finally this infographic below shows the difference.
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