Finance Calculator (TVM)
Initial investment or loan amount (enter as positive)
Regular payment amount (negative for payments out)
TVM Variables
Understanding Time Value of Money
What is TVM?
The Time Value of Money (TVM) is a fundamental financial concept that states money available today is worth more than the same amount in the future due to its potential earning capacity. This core principle underlies most financial calculations for investments, loans, and savings.
Core Principle
$100 today is worth more than $100 a year from now because you can invest that $100 today and earn interest. If you earn 5% annually, $100 today becomes $105 in one year.
The Five TVM Variables
Present Value (PV)
The current worth of a future sum of money or stream of cash flows, given a specified rate of return.
Future Value (FV)
The value of a current asset at a future date based on an assumed rate of growth.
Payment (PMT)
A fixed periodic payment, such as a loan payment or regular investment contribution.
Interest Rate (I/Y)
The annual rate of return or cost of borrowing, expressed as a percentage.
Number of Periods (N)
The total number of compounding periods (years, months, etc.) in the calculation.
TVM Formulas
Future Value (single sum)
Present Value (single sum)
Future Value of Annuity
Payment (loan)
Practical Applications
| Solve For | Use Case | Example |
|---|---|---|
| FV | Investment growth | How much will $10,000 grow to in 20 years? |
| PV | Current value of future money | What is $1M in 30 years worth today? |
| PMT | Loan payments, savings goals | What monthly payment for a $300K mortgage? |
| N | Time to reach goal | How long to save $100K at $500/month? |
| I/Y | Required return | What rate turns $50K into $200K in 15 years? |
Payment Timing
Ordinary Annuity (End)
Payments occur at the end of each period. Most common for loans where interest accrues before the payment is made.
Annuity Due (Beginning)
Payments occur at the beginning of each period. Common for rent or insurance premiums paid in advance.
Sign Convention
In financial calculations, cash flows have signs: money you pay out is typically negative, and money you receive is positive. When using this calculator, enter positive values for clarity - the calculator handles the sign conventions internally.
Frequently Asked Questions
What is the Time Value of Money (TVM)?
The Time Value of Money is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity. A dollar today can be invested to earn interest, making it worth more than a dollar received later. TVM is the foundation for most financial calculations including loans, investments, and retirement planning.
How do I calculate future value?
Future Value (FV) = Present Value x (1 + interest rate)^number of periods. For example, $10,000 invested at 7% for 20 years: FV = $10,000 x (1.07)^20 = $38,697. If you're making regular contributions, use the future value of an annuity formula which accounts for each payment growing over time.
What is the difference between present value and future value?
Present Value (PV) tells you what a future sum is worth today, while Future Value (FV) tells you what today's money will be worth in the future. They're two sides of the same coin. Use PV to determine how much you need to invest now to reach a goal. Use FV to see what your current investments will grow to.
What is the difference between ordinary annuity and annuity due?
An ordinary annuity makes payments at the end of each period (like most loans), while an annuity due makes payments at the beginning (like rent or insurance premiums). Annuity due payments have slightly higher values because each payment has one more period to earn interest. Most financial calculations default to ordinary annuity.