Time Value of Money (TVM) Calculator
The Time Value of Money (TVM) states that a dollar received today is worth more than a dollar received tomorrow due to its potential earning capacity. Compute present value, future value, interest rate, and periodic annuities.
Formula & Methodology
FV = PV * (1 + r)^n + PMT * [((1 + r)^n - 1) / r]PVCurrent lump sum capital value.
FVValue of cash flow stream at a specified future date.
rDiscount or compounding rate per period.
nTotal compounding periods (years or months).
PMTAnnuity payment made each period.
Practical Worked Example
An analyst wants to find the future value of Rs 5,00,000 invested today at 10% annual compound interest over 10 years.
Interpretation & Industry Benchmarks
TVM forms the mathematical foundation of all asset valuation, bond pricing, loan amortization, and capital budgeting.
Investment more than doubles over horizon.
Typical of shorter horizons or conservative asset yields.
Industry Nuance: Discounting future cash flows back to PV is used in DCF models; compounding forward to FV is used for retirement and wealth planning.
Analytical Limitations
- Assumes constant reinvestment rate across all compounding periods.
Frequently Asked Questions
What is the difference between PV and FV?
Present Value (PV) is the current worth of future cash flows; Future Value (FV) is the compounded worth of current money at a future date.