present value (PV)

present value (PV)

The current value of future cash payments when the payments are discounted by a rate that is a function of the interest rate. For example, the present value of $1,000 to be received in two years is $812 when the $1,000 is discounted at an annual rate of 11%. Conversely, $812 invested at an annual return of 11% would produce a sum of $1,000 in two years. Compare future value. See also net present value.