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PV

PV

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Description

Use this function to calculate the present value of an investment based on a series of future payments. Supported in Chains.

PV is useful for determining how much an investment is worth now, given a specified interest rate and a series of future payments. It's commonly used in financial planning and investment analysis.

 

Syntax

PV(rate, nper, pmt, [fv], [type])

 

Inputs

This function accepts the following arguments:

Name Required Description Valid input
rate Yes The interest rate per period. A decimal number, a reference to a cell containing a decimal number, or a formula which results in either of these. 
nper Yes The total number of payment periods in an investment. A positive integer, a reference to a cell containing a positive integer, or a formula which results in either of these. 
pmt Yes The payment made each period.

A number, a reference to a cell containing a number, or a formula which results in either of these.  This number is typically negative if you are paying out.
fv No The future value, or cash balance, you want after the last payment is made. A decimal number, a reference to a cell containing a decimal number, or a formula which results in either of these. If omitted, it's assumed to be 0.
type No Indicates when payments are due. 0 for end of period, 1 for beginning. If omitted, it's assumed to be 0.

 

Example

Scenario

You're considering an investment that promises to pay $1,000 annually for the next 5 years. If the interest rate is 5% per year, what's the present value of this investment?

Sample data

  A B
1 Loan Amount 200000
2 Annual Interest Rate 0.05
3 Loan Term (years) 30

Sample formulas

Use case Formula Explanation and Result
An investment promises to pay $1,000 annually for the next 5 years. If the interest rate is 5% per year, what's the present value of this investment? =PV(5%, 5, -1000)

This formula works in the following manner:

  • PV(: This is the function itself.
  • 5%: This is the interest rate per period.
  • 5: This is the total number of payment periods (nper).
  • -1000: This is the payment (pmt) made each period. It's negative because it represents cash received (an inflow, offsetting an initial outflow/investment).
  • The fv (future value) and type arguments are omitted, defaulting to 0 (no lump sum at the end) and 0 (payments at the end of the period), respectively.

For this data, the formula returns 4,329.48.
An investment promises to pay $1,000 annually for the next 5 years. If the interest rate is 5% per year, what's the present value of this investment if payments are made at the beginning of each period.? =PV(5%, 5, -1000, 0, 1)

This formula works in the following manner:

  • PV(: This is the function itself.
  • 5%: The interest rate per period.
  • 5: The total number of payment periods (nper).
  • -1000: The payment (pmt) made each period.
  • 0: The fv (future value) is explicitly set to 0.
  • 1: The type argument is set to 1, indicating payments are made at the beginning of each period.

For this data, the formula returns 4,545.95.
An investment promises to pay $1,000 annually for the next 5 years. If the interest rate is 5% per year, what's the present value if there's a $5,000 lump sum payment at the end? =PV(5%, 5, -1000, 5000)

This formula works in the following manner:

  • PV(: This is the function itself.
  • 5%: The interest rate per period.
  • 5: The total number of payment periods (nper).
  • -1000: The payment (pmt) made each period.
  • 5000: The fv (future value) argument, representing a lump sum received at the end of the term.
  • The type argument is omitted, defaulting to 0 (payments at the end of the period).

For this data, the formula returns approximately -8,237.15. The negative result indicates the initial investment (outflow) required to receive these future cash flows.

 

Notes

  • rate is the interest rate per period. If you make monthly payments but your rate is annual, divide the rate by 12.
  • nper is the total number of payment periods. If you make monthly payments for 5 years, nper would be 5*12 = 60.
  • pmt is typically negative if you are paying out money, and positive if you are receiving money.
  • The fv and type arguments are optional. If omitted, fv is assumed to be 0 and type is assumed to be 0.
  • The result of PV is typically negative, indicating money you would need to invest now.

 

Tips

  • Use PV to determine if a future stream of payments is worth a certain amount today.
  • You can combine PV with other financial functions such as  FV, PMT, or XNPV for comprehensive financial analysis.
  • Be consistent with your time periods. If your payments are monthly, make sure your interest rate is also expressed monthly.
  • Remember that changing the type from 0 to 1 can significantly affect the result, especially for short-term investments.

 

Related functions

FV
IRR
NPV
PMT
PV
XIRR
XNPV

Description Use this function to calculate the present value of an investment based on a series of future payments. S...