Discount Factor Calculator
Find the discount factor for any rate, time and compounding frequency — including continuous compounding — and the present value of a future amount, with a year-by-year discount factor table.
How it works
Discount factor DF = 1 ÷ (1 + r ÷ m)^(m × t) · continuous: DF = e^(−r × t) · present value = future amount × DF · compound factor = 1 ÷ DF · effective annual rate = (1 + r ÷ m)^m − 1
A discount factor is the present value of one unit of money received at a future date: multiply any future cash flow by it to bring it back to today. It falls as the rate or the waiting time rises, and it is the building block of every NPV, bond-pricing and DCF calculation — a discounted cash flow model is simply a sum of cash flows times their discount factors. More frequent compounding at the same nominal rate gives a slightly smaller factor, with continuous compounding as the limit.
Worked example
At 8% a year with annual compounding, the discount factor for 5 years is 1 ÷ 1.08⁵ = 0.680583. A payment of 10,000 due in 5 years is therefore worth 10,000 × 0.680583 = 6,805.83 today — 3,194.17 less than its face value. The matching compound factor is 1.08⁵ = 1.469328.
Sources: Corporate Finance Institute — Discount factor · Wikipedia — Discounting
Frequently asked questions
How do you calculate a discount factor?
Divide 1 by (1 + rate) raised to the number of periods. At 8% for 5 years with annual compounding it is 1 ÷ 1.08⁵ = 0.680583, so 10,000 received in 5 years is worth 6,805.83 today.
What is the difference between a discount factor and a discount rate?
The discount rate is the yearly percentage (for example 8%); the discount factor is the multiplier that rate produces for a specific date (for example 0.6806 for 5 years). Each cash-flow date has its own factor.
What does continuous compounding do to the discount factor?
It uses e^(−r × t) instead of (1 + r)^(−t). At 8% for 5 years the factor drops from 0.680583 (annual) to 0.670320 (continuous) because interest is compounded instantly.
Where are discount factors used?
In net present value and DCF analysis, bond and loan pricing, lease accounting, pension and insurance reserves, and anywhere future money must be compared with money today.
Related calculators
Educational estimate, not financial advice. Real contracts, fees, taxes, day-count and rounding rules differ — check the official cost disclosure and your agreement before deciding.