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Mortgages & MoneyLive
Future / Present Value
Inputs
£
%
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How it works
The time value of money: a pound today is worth more than a pound tomorrow because today's pound can be invested. FV and PV are inverse operations using compound interest.
Worked example
£10k at 5% for 10 years: FV £16,289. The £16,289 you'd receive in 10 years is worth £10,000 today.
Who should use this
- •Investment planning
- •Comparing pension lump sums vs annuity
- •Discounted cash flow analysis
Common mistakes
- ×Confusing real vs nominal rates (does the rate include inflation?)
- ×Using FV for irregular cash flows (use NPV instead)
Frequently asked questions
What discount rate should I use for PV?▾
Often a 'risk-free' rate (e.g. UK gilt yield) or your opportunity cost — whatever you'd otherwise earn.