- Start date
- The present value calculation date.
- End date
- The day when the lump sum investment return will be equal to the desired future value.
- Future value
- The value for what you want to find out the present value.
- Rate of return
- Your anticipated rate of return from the lump sum investment. This rate of return compounds annually based on the type of compounding method you have chosen. But the reality is, the actual rate of return may not be the same, rather lower, as the investors are interested on stable inflows of funds and hence, invest their money with a more conservative approach.
- Compounding method
- The frequency of compounding. The rate of return can be compounded daily, weekly, bi-weekly, monthly, quarterly, semi-annually, or annually. More frequent payments lead to more compounded income. You can choose different frequency for different assets. For example, annual compounding is selected usually for capital market instruments. So, while investing, be informed of how frequently the financial institution is compounding your investment.