What discount rate should I use?

Commonly your expected investment return, cost of capital, or a rate reflecting the risk of the future payment — this is a judgment call based on your specific situation.

How is this different from the Finance Calculator?

This page is a focused, single-purpose version of present value. The Finance Calculator can solve for present value, future value, payment, or number of periods, all in one flexible tool.

Present Value Calculator

Calculate the present value of a future amount — how much a future sum (or stream of payments) is worth in today's dollars, given a discount rate.

Future value

Periodic payment (optional)

Discount rate (per period)

Number of periods

Present Value

$6,139.13

How It Works

The time value of money

A dollar today is worth more than a dollar in the future, because today's dollar can be invested and grow. Present value discounts a future amount back to its equivalent value today at a given rate of return.

Example Calculation

At a 5% discount rate, $1,000 received in 10 years is worth about $614 in today's dollars.

Common Mistakes

Using an unrealistic discount rate — the result is highly sensitive to this assumption, especially over long time horizons.
Confusing present value (working backward from a future amount) with future value (projecting forward from today) — they answer opposite questions.

Frequently Asked Questions

What discount rate should I use?: Commonly your expected investment return, cost of capital, or a rate reflecting the risk of the future payment — this is a judgment call based on your specific situation.
How is this different from the Finance Calculator?: This page is a focused, single-purpose version of present value. The Finance Calculator can solve for present value, future value, payment, or number of periods, all in one flexible tool.