Learn more about present value and its use in financial economics.

By Publisher: Khan Academy | Factsheet

Present Value is one of the most widely used concepts in the financial world as its calculation can determine the current worth of a future sum of money or stream of cash flow given a specified rate of return. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings coming in or obligations going out. This free online financial economics course reviews what the concept of present value is all about and discusses how to calculate the present value using simple calculations. You will learn why the calculation of present value is extremely important in many financial calculations such as net present value, bond yields, spot rates, and pension obligations. Having completed this free course you will be able to calculate present value to help you decide whether you should accept a cash rebate, 0% financing on the purchase of a car or to pay points on a mortgage. This course will be of interest to professionals in the accounting and financial services sectors, to accounting, finance or economics students, or to the general public who wish to understand the concept of present value and how its calculation can help them with their personal finances.