Perpetuity

A constant stream of identical cash flows with no end. The formula for determining the present value of a perpetuity is as follows:

Perpetuity


This is not as abstract a concept as you may think; the British issued bonds, called consols, which are a great example of a perpetuity. By purchasing a consol from the British government, the bondholder is entitled to receive annual interest payments forever. Although it may seem a bit illogical, an infinite series of cash flows can have a finite present value. Because of the time value of money, each payment is only a fraction of the last.

The concept of a perpetuity is used often in financial theory, such as the dividend discount model (DDM).


Investment dictionary. . 2012.

Synonyms:

Look at other dictionaries:

  • perpetuity — per·pe·tu·i·ty /ˌpər pə tü ə tē, tyü / n pl ties 1: the quality, state, or duration of being perpetual devised to them in perpetuity 2 a: the condition of a future estate limited in such a way as not to vest within the period fixed by law for the …   Law dictionary

  • Perpetuity — Per pe*tu i*ty, n. [L. perpetuitas: cf. F. perp[ e]tuit[ e].] 1. The quality or state of being perpetual; as, the perpetuity of laws. Bacon. [1913 Webster] A path to perpetuity of fame. Byron. [1913 Webster] The perpetuity of single emotion is… …   The Collaborative International Dictionary of English

  • perpetuity — ► NOUN (pl. perpetuities) 1) the state or quality of lasting forever. 2) a bond or other security with no fixed maturity date. ● in (or for) perpetuity Cf. ↑in perpetuity …   English terms dictionary

  • perpetuity — [pʉr΄pə to͞o′ə tē, pʉr΄pətyo͞o′ə tē] n. pl. perpetuities [ME perpetuite < OFr perpetuité < L perpetuitas] 1. the state or quality of being perpetual 2. something perpetual, as an annuity or pension to be paid indefinitely or, often specif …   English World dictionary

  • Perpetuity — A perpetuity is an annuity that has no definite end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence (although the British government has issued them in the past, and they are known and still… …   Wikipedia

  • Perpetuity — A constant stream of identical cash flows without end, such as a British consol. The New York Times Financial Glossary * * * perpetuity per‧pe‧tu‧i‧ty [ˌpɜːpˈtjuːti ǁ ˌpɜːrpˈtuː ] noun in perpetuity LAW for all future time: • The contract… …   Financial and business terms

  • perpetuity — A constant stream of identical cash flows without end, such as a British consol. Bloomberg Financial Dictionary * * * perpetuity per‧pe‧tu‧i‧ty [ˌpɜːpˈtjuːti ǁ ˌpɜːrpˈtuː ] noun in perpetuity LAW for all future time: • The contract allows them …   Financial and business terms

  • Perpetuity — (Roget s Thesaurus) >Endless duration. < N PARAG:Perpetuity >N GRP: N 1 Sgm: N 1 perpetuity perpetuity eternity everness aye sempiternity immortality athanasia Sgm: N 1 interminability interminability agelessness everlastingness …   English dictionary for students

  • perpetuity — n. in perpetuity ( forever ) * * * [ˌpɜːpɪ tjuːɪtɪ] in perpetuity ( forever ) …   Combinatory dictionary

  • perpetuity — I (New American Roget s College Thesaurus) Endless duration Nouns perpetuity; everlastingness, unceasingness, etc.; eternity, infinity, aye, timewithout end, sempiternity; deathlessness, immortality, athanasia; incessance, continuity, durability …   English dictionary for students

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.