Present Value and Future Value
Install and import#
npm install fintech-algorithmsimport { presentValueAndFutureValue } from "fintech-algorithms/foundations/financial-arithmetic-time-value-and-returns/present-future-value";Signature#
presentValueAndFutureValue(input)Moves money along the timeline in both directions at once: it compounds principal forward and discounts a supplied futureValue back, over the same number of periods at the same rate.
Parameters#
| Name | Type | Notes |
|---|---|---|
input | D00Input | A plain object. Every F02 topic first reads principal, rate and periods and validates them before any per-topic branch runs. This topic then reads the input key futureValue, the amount to be discounted back to today, coerced with Number. |
Returns#
{ futureValue: number; presentValue: number }
The returned futureValue is principal * (1 + rate) ** periods and is computed from principal, not from the input key of the same name. presentValue is the input futureValue divided by (1 + rate) ** periods.
Errors#
- When input is not a plain object — throws TypeError
- When principal is negative, periods is negative, or rate is at or below -1 — throws RangeError
Complexity: time O(1),
space O(1).
Worked example#
verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.
Input#
{
"principal": 1000,
"rate": 0.05,
"periods": 3,
"compoundsPerPeriod": 12,
"futureValue": 1200,
"cashFlows": [-1000, 400, 400, 400],
"startValue": 100,
"endValue": 110,
"returns": [0.1, -0.05, 0.08],
"frequency": 12,
"periodicReturn": 0.01
}Call#
presentValueAndFutureValue(input)Returns#
object with 2 fields: futureValue, presentValue
{
"futureValue": 1157.6250000000002,
"presentValue": 1036.6051182377712
}Diagrams#
Calculation flow#
Present Value and Future Value — four-part map
flowchart LR
A["Name the input"] --> B["Apply: FV = PV x (1 + r)^t; PV = FV / (1 + r)^t"]
B --> C["Check units and boundary"]
C --> D["Explain the output"]
How it works#
This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.
References#
- CFA_TVM - Time Value of Money in Finance — CFA Institute
- CFA_QM - CFA Institute Quantitative Methods Study Session — CFA Institute
- Author-derived and synthetic boundary