Present Value Calculator · Practical guide
What Discount Rate Should You Use for Present Value?
The discount rate is your assumed rate of return — here is how to pick a defensible number.
At a glance
A Practical Range
Most personal-finance present value questions use a discount rate between 3% and 10%. The right number is the return you could realistically earn on the money while you wait — sometimes called your opportunity cost.
Interactive tool
Present Value Calculator
Enter your own values, then compare the result with the examples below.
Present Value Analysis
How Much the Rate Matters
For $100,000 arriving in 10 years, the present value swings by tens of thousands of dollars depending on your choice:
| Rate | Typical Meaning | PV of $100,000 in 10 Years |
|---|---|---|
| 4% | Safe savings, Treasuries | $67,555.64 |
| 7% | Blended portfolio | $50,834.93 |
| 10% | Aggressive stock-market assumption | $38,554.33 |
Moving from 4% to 10% cuts the present value by nearly $29,000 — the rate choice matters more than almost anything else in the calculation.
Match the Rate to the Risk
A guaranteed payment — a government bond, an insured deposit, a court settlement — deserves a low, safe rate. A payment that depends on a business succeeding or a market performing deserves a higher rate to compensate for the chance it never arrives. When in doubt, run the calculator at two or three rates and treat the answers as a range rather than a point.
Match the Rate to the Time Unit
The rate and the period must share the same unit. This calculator compounds annually, so enter an annual rate and a number of years. Using an annual rate with months, or vice versa, will understate or overstate the discount by a factor of twelve.
Frequently Asked Questions
Can I just use the inflation rate as my discount rate?
You can when the only question is purchasing power. But if you could invest the money for a real return above inflation, that higher opportunity cost is the better rate.
What rate do companies use?
Businesses typically discount at their weighted average cost of capital — often somewhere between 7% and 12% — so that a project's cash flows are judged against what the financing actually costs.
What happens if I set the rate to 0%?
The present value equals the future value exactly. A 0% rate says a dollar in ten years is worth a full dollar today, which ignores both returns and inflation.
Should I use a higher rate for money far in the future?
Not necessarily — the formula already discounts distant money more heavily. Raise the rate only if the payment itself is riskier, not simply because it is later.