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If you have long term investments or a settlement that are giving you an income stream, but you are considering a trade for an immediate lump sum, you are concerned with the present value of your assets. Present value means simply, how much is an investment that pays off sometime in the future worth at this current moment in time?

Because of immediate or unexpected emergencies, or sometimes to simply take advantage of a current investment opportunity, many people consider trading annuity payments or a future payoff for an immediate lump sum payment, but do not know how to calculate the present value of their investment. If they are unaware of the true market value of their investment, they can easily be cheated out of value. Some institutions specialize in buying investments such as these from unsuspecting people, and immediately reselling them at full present value for an immediate riskless profit.

Before the prevalence of the internet, only financial experts had access to the tools necessary to perform anything more than a simple present value calculation. Sure, they teach the basics of present value in high school math, but investments in the real world are never that ideal. Fortunately, the internet has given to the average citizen the information that was once privy only to the financial elite in the form of a present value calculator.

All an investor need do is go to a present value calculator site, type in the future value of his or her investment, the amount of time meant for the payoff, and the interest rate at which the investment is paying. There are more complex calculations as well, but these are the basic parameters. The online calculator will then tell the investor what his or her investment is worth in the present day.

Though other factors may affect the value of your investment, the present value calculator can definitely be used as a bellweather before you go into a financial institution or individual to make a business deal to trade a future investment for a present day payoff. No longer are complex calculations locked away from you; make sure to use these resources to your advantage.

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Wiki User

14y ago

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