Present Value Interest Factor - PVIF

Definition of 'Present Value Interest Factor - PVIF'


A factor that can be used to simplify the calculation for finding the present value of a series of values. PVIFs can be presented in the form of a table with PVIF values seperated by respective period and interest rate combinations.

Present Value Interest Factor (PVIF)


The 'r' represents the discount interest rate, and the 't' represents the number of periods.

Investopedia explains 'Present Value Interest Factor - PVIF'




Using the PVIF works best when you are attempting to discount one value in the future. For example, assume you are going to receive $5,000 in four years time, with the current discount interest rate being 8%. Using the standard present value formula the calculation would be $5,000 / (1+.08)4 .

This would result in a present value of approximately $3,675.15. By using a PVIF table, an individual can identify the factor for this calculation being 0.73503 (calculated: 1/(1.08^4)). They can then multiply the $5,000 by 0.73503, which results in $3675.15 as well. This is another way to come to the same answer as the standard present value formula, but becomes a useful technique when you are comparing or dealing with a large number of values.



comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center