Present Value Interest Factor - PVIF


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.

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.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Present Value Interest Factor Of Annuity - PVIFA — A factor which can be used to calculate the present value of a series of annuities. The initial deposit, earning interest at the periodic rate (r), perfectly finances a series of (N) consecutive dollar withdrawals. PVIFA is also a variable used… …   Investment dictionary

  • present value — The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. To determine the present value, each future cash flow is multiplied by a present value factor. For example, if the… …   Financial and business terms

  • present value — discounted value The result arrived at in a discounted cash flow calculation by multiplying a projected annual cash flow figure by a discount factor derived from a hurdle rate of interest and a time period …   Accounting dictionary

  • present value — discounted value The result arrived at in a discounted cash flow calculation by multiplying a projected annual cash flow figure by a discount factor derived from a hurdle rate of interest and a time period …   Big dictionary of business and management

  • Net present value — In finance, the net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when… …   Wikipedia

  • Interest rate cap and floor — Interest rate c An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for… …   Wikipedia

  • Interest rate swap — An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another party s stream of cash flows. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. They… …   Wikipedia

  • value — A particular quantitative determination. For values not given below, see the specific name. SEE ALSO: index, number. [M.E., fr. O.Fr., fr. L. valeo, to be of v.] acetyl v. the milligrams of KOH required to neutralize the acetic acid produced by… …   Medical dictionary

  • Time value of money — The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. The time value of money is the central concept in finance theory. For example, $100 of today s money invested for one year… …   Wikipedia

  • capital and interest — ▪ economics Introduction       in economics, a stock of resources that may be employed in the production of goods and services and the price paid for the use of credit or money, respectively.       Capital in economics is a word of many meanings …   Universalium

  • Terminal value (finance) — This article is about finance concept. For other uses, see Terminal value (disambiguation). In finance, the terminal value (continuing value or horizon value) of a security is the present value at a future point in time of all future cash flows… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.