<--Back to Wiki Home

Define Present Value of $1 Per Period in Real Estate

Present Value of $1 Per Period: 

"Present Value of $1 Per Period" means finding out how much a series of equal dollar payments, like getting $1 every month or year, are worth today. It helps you understand the value of money you'll get in the future, but in today's terms.

Example: 

"Present Value of $1" helps you understand how much a single dollar you'll receive in the future is worth today. It takes into account things like inflation and missed opportunities to invest.

On the other hand, "Present Value of $1 Per Period" is about a series of equal dollar amounts you'll receive at regular intervals (like monthly or yearly payments) and figuring out the value of all those future payments combined in today's dollars.

Here's an example for each:

Present Value of $1: Let's say you'll receive $1 in 2 years. If the interest rate is 4%, that $1 would be worth around $0.92 today because you could have invested 92 cents and earned 4% each year to have $1 in 2 years.

Present Value of $1 Per Period: Now imagine you'll receive $1 every year for 3 years. You'll need to find the present value of each $1 received (like we did above) and add them up. So, the present value of the $1 received in the first year would be around $0.96 (assuming a 4% interest rate), in the second year, it would be around $0.92, and in the third year, it would be about $0.89. When you add those up ($0.96 + $0.92 + $0.89), the total present value of receiving $1 per year for 3 years is approximately $2.77. This means that the combined value of all those future $1 payments, in today's dollars, is $2.77.

In summary, the difference between the Present Value of $1 and the Present Value of $1 Per Period is that the first concept deals with the value of a single future dollar in today's terms, while the second concept deals with the combined value of a series of equal dollar payments received at regular intervals in today's terms.

"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"

Oh, the dollars of tomorrow, they seem shiny and bright,
But their value today, might not be quite right.

For the prices will rise, and the dollars will shrink,
And the chances to grow, they will be gone in a blink.

So remember, dear friend, when the future's in sight,
The Present Value of $1 Per Period brings the value to light.