Finance & Interest
Advanced
Perpetuity
Present value of an infinite constant cash flow.
Formula
Variables
CCash flow per period
rDiscount rate
Example
A bond paying $50/year forever, discounted at 5%, is worth 50/0.05 = $1000.
Did You Know?
A perpetuity pays forever, yet has a finite value — Britain once issued such never-maturing bonds called consols.