Next video:

The present value interest factor (PVIF) is a number from a table that makes it easier to calculate the present value of a payment or value to be received in the future. The PVIF table shows a discount factor based on the discount interest rate and the number of time periods before the value will be received. The table is usually presented with the time period in the rows and the interest rate in the columns.Â

For instance, a person needing to know the present value of \$1,000 that will be received in five years where the discount rate is 6% will go to the table and find the row for five years, and then move to the right for the 6% column to find the discount factor of .7050. She will then multiply \$1,000 by that factor to find that the present value is \$705.Â

Each factor in the table is derived from the formula:

PVIF = 1/(1+r)^t

Where r is the interest rate and t is the time period.Â

In the example, multiplying \$1,000 by the formula of 1/(1+6%)^5 gives the same answer of \$705.

Â

## In This Series

Related Articles
1. Investing

### Understanding the Time Value of Money

Find out why time really is money by learning to calculate present and future value.
2. Investing

### Time Value Of Money: Determining Your Future Worth

Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation.
3. Retirement

### How to Calculate the Value of Annuities

Here's everything you need to account for when calculating the present and future value of annuities.
4. Investing

### Present Value Interest Factor of Annuity (PVIFA)

PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
5. Investing

### Understanding The Discounted Payback Period

Itâ€™s similar to a simple payback, but a discounted payback period accounts for moneyâ€™s time value. Itâ€™s a more precise estimate of when investors will recover their total investment.
6. Managing Wealth

### Valuation Of A Preferred Stock

To find the value of the preferred stock, each future dividend payment needs to be discounted back to the present, and then added together.
7. Investing

### Valuation Of A Preferred Stock

Determining the value of a preferred stock is important for your portfolio. Learn how it's done.
Hot Definitions
1. ### Asset Allocation

An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's ...
2. ### IRR Rule

A measure for evaluating whether to proceed with a project or investment. The IRR rule states that if the internal rate of ...
3. ### Short Covering

Short covering is buying back borrowed securities in order to close an open short position.
4. ### Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
5. ### Liquid Asset

An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
6. ### Nostro Account

A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...