Present value

The amount that must be invested today at a given rate of interest over a specified time is called present value.

The present value of a bond is the value at which it should sell in the marketplace. Market value therefore is a function of the three factors that determine present value: (1) the dollar amounts to be received, (2) the length of time until the amounts are received, and (3) the market rate of interest.

Present value means today’s value of a payment to be received in the future when the interest rate is i. Also called present discounted value.

Share it:  Cite

More from this Section

  • Multicar discount
    Multicar discount reduction in auto insurance premiums for an insured who owns two or ...
  • Profit center
    A profit center refers to a responsibility that incurs costs (and expenses) and also generates ...
  • Insurance option
    Insurance option is an option that derives value from specific insurable losses or from ...
  • Fundamentals of Balance of payments Accounting
    The BOP must balance. If it does not, something has not been counted or has been counted ...
  • Spot Exchange
    Spot Exchange is foreign exchange bought and sold for immediate delivery. In practice, ...