Perpetuity

A perpetuity is a stream of equal cash flows that continues forever — there is no end date. Unlike an annuity, which stops after a fixed number of payments, a perpetuity keeps paying the same amount each period indefinitely. Because the payments go on forever, the present value of a perpetuity is not found by summing an infinite series directly; instead, it is given by the simple formula $PV = \frac{C}{r}$, where $C$ is the periodic cash flow and $r$ is the discount rate per period. This result comes from the …