Understanding Present Value | Alison

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Understanding Present Value - Revised

This free online course will give you an overview of present value and its importance in financial economics.

Free Course
This free online course in Understanding Present Value will teach you that the worth of an amount of money at present is more than that same amount in the future. In short, money received in the future is not worth as much as an equal amount received today. This course will teach you about the concept of present value and how to calculate it, a technique used in the financial world to help determine a cash flow given a specified rate of return.
  • Duration

    1.5-3 Hours
  • Assessment

  • Certification

  • Responsive

  • Publisher

    Khan Academy





View course modules


This course starts off by stating what the concept of present value is all about and then discusses how to calculate it by using simple calculations. The course will then show you that determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings coming in or obligations going out. It will also teach you why the calculation of present value is extremely important in many financial computations such as net present value, bond yields, spot rates, insurance rates, and pension obligations.

You will then learn how to calculate present value so you will be able to decide whether you should accept a cash rebate, 0% financing on the purchase of a car, or pay points on a mortgage. The course will also teach you when is the best time to invest your money in the bank by computing what will your money be worth one or two years from now.

The concept of present value lies at the core of finance and is the basis for stock and bond pricing, financial modeling, banking, and insurance. Every time a business does something that will result in a future obligation, it must calculate the present value of the future cash inflow or outflow. By the end of this course, you will be able to compute the present value of your current investment, which will greatly help with your future finances.

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Learning Outcomes

The key learning points for this module are:

  • Define what Present value means
  • Examine how to calculate the present value of something
  • Outline the key factors in using present value to make financial decisions
  • Demonstrate an overall awareness of the general concept of Present value


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