← Legal Glossary
Present Value
Definition
The current worth of a future stream of payments, calculated by applying a discount rate to account for the time value of money. A dollar to be paid 30 years from now is worth less than a dollar today, and the present value calculation determines exactly how much less based on the chosen discount rate.
Examples
- •The actuary had to calculate the present value of decades of future pension payments owed to retirees, and the choice of discount rate dramatically affected that calculation.