Present value
Certified Financial Planner glossary · Certified Financial Planner
Definition
The value today of a future cash flow or series of cash flows, discounted at an appropriate rate.
Present value in plain English
A client asks what a promised lump sum in fifteen years is worth in today's dollars so they can compare it to cash on hand. Present value is that amount today after discounting a future cash flow or series at an appropriate rate. Correct keystrokes still fail if you use the wrong period rate, mix monthly cash flows with an annual rate, or discount the wrong set of flows. Pin the timing and the rate before you trust the display, especially when the stem hides a compounding mismatch.
Practice Present value
Related Certified Financial Planner terms
Certified Financial Planner practice questions · Certified Financial Planner flashcards · Certified Financial Planner study guide