Present Value
Present value is a financial term used to describe the current value of a future sum of money or stream of cash flows given a specified rate of return. It is used to compare the value of money today to the value of money in the future, taking into account inflation and other factors. Present value is used to determine the value of an investment today, given the expected returns in the future. It is also used to compare the value of different investments and to determine the cost of capital.
History of Present Value
The concept of present value was first introduced by Italian mathematician and economist Leonardo Fibonacci in the 13th century. He used the concept to calculate the value of annuities and other investments. The concept was further developed by French mathematician and economist Antoine Augustin Cournot in the 19th century. Cournot used the concept to calculate the value of a future sum of money given a specified rate of return. The concept of present value has since been widely used in finance and economics.
Comparison Table
| Year | Present Value | Future Value |
|---|---|---|
| 2020 | $100 | $110 |
| 2021 | $90 | $110 |
| 2022 | $80 | $110 |
Summary
Present value is a financial term used to describe the current value of a future sum of money or stream of cash flows given a specified rate of return. It is used to compare the value of money today to the value of money in the future, taking into account inflation and other factors. Present value is used to determine the value of an investment today, given the expected returns in the future. More information about present value can be found on websites such as Investopedia, The Balance, and Investing.com.
See Also
- Future Value
- Discount Rate
- Net Present Value
- Internal Rate of Return
- Annuity
- Compound Interest
- Time Value of Money
- Inflation
- Risk-Free Rate
- Cash Flow
