What is the term for the amount paid for the right to receive future payments, assuming a known interest rate?

The term for the amount paid for the right to receive future payments, assuming a known interest rate, is "Present Value." This concept is foundational in finance and economics, as it relates to the time value of money, which posits that a specific sum of money today is worth more than the same amount in the future due to its potential earning capacity.

When an entity calculates present value, it discounts future cash flows back to the present date using a specified interest rate. This rate accounts for the risk and the opportunity cost of capital, enabling a rational decision-making process regarding investments and financial transactions. Thus, the present value represents the current worth of a future sum of money or stream of cash flows.

Although future value and current valuation may relate to how money is evaluated over time, they do not accurately describe this specific financial principle concerning the discounting back to the present. Future cost does not specifically denote a right to receive payments but rather would refer to expenses anticipated in the future. Understanding present value is critical for financial planning and investment appraisal, making it a key concept in legal management and financial decision-making.