Time Value of Money Calculator
Calculate present value, future value, interest rates, and time periods with compound interest
Time Value of Money Calculator
Current value of money today
Annual nominal interest rate
Investment or loan duration
Future Value Result
Formula used:
FV = PV × (1 + r/n)^(n×t)
Example: $100 Investment for 3 Years at 5%
Present Value: $100
Interest Rate: 5% annually
Time Period: 3 years
Future Value: $115.76
Total Interest: $15.76
Formula: FV = 100 × (1 + 0.05)³
TVM Key Concepts
Present Value
Current worth of future money
Future Value
Value of current money in the future
Interest Rate
Cost of money or rate of return
Time Period
Duration of investment or loan
Compounding Frequency Impact
Higher frequency = Higher effective return due to compounding effect
Understanding Time Value of Money
What is Time Value of Money?
The time value of money (TVM) is the concept that money available now is worth more than the same amount in the future due to its potential earning capacity. This principle forms the foundation of finance and investment decisions.
Why Money Has Time Value
- •Investment Opportunity: Money can be invested to earn returns
- •Inflation: Money loses purchasing power over time
- •Risk: Future payments carry uncertainty risk
- •Liquidity: Current money provides immediate purchasing power
TVM Applications
Investment Planning
Calculate future value of investments and required rates of return
Loan Analysis
Determine present value of loan payments and interest costs
Retirement Planning
Calculate how much to save for future retirement needs
Business Valuation
Value companies based on discounted future cash flows
Periodic Compounding
FV = PV × (1 + r/n)^(n×t)
PV = FV / (1 + r/n)^(n×t)
- FV: Future Value
- PV: Present Value
- r: Annual interest rate (decimal)
- n: Compounding frequency per year
- t: Time in years
Continuous Compounding
FV = PV × e^(r×t)
PV = FV / e^(r×t)
- e: Mathematical constant (≈2.718)
- r: Annual interest rate (decimal)
- t: Time in years
- Note: Theoretical maximum compounding