Your browser will redirect to your requested content shortly. Perpetuity Present Value of a perpetuity is used to determine the present value of a stream of equal payments that do not end. Profitability calculation formula present value of a perpetuity formula can also be used to determine the interest rate charged, and the size of the regular payment.
Use the perpetuity calculator below to solve the formula. Perpetuity Definition Perpetuity is a stream of equal payments that does not end. Perpetuity A Perpetuity is simply a stream of equal payments that carries on indefinitely. Sometimes a Perpetuity is known as a perpetual annuity. An investor purchases a Perpetuity and in return receives a stream of equal payments that never ends.
The initial principal is never returned to the investor. Since the Perpetuity returns a fixed payment, payments in the future have a lower present value the farther away they occur. This means that the present value of future payments will eventually approach zero. This actually simplifies the calculation of the present value of a Perpetuity, since the present value is simply equal to the regular payment divided by the discount rate. In the real investing world, there are few actual perpetuities.