[pur-pi-too-i-tee, -tyoo-] 
| 1. | the state or character of being perpetual (often prec. by in): to desire happiness in perpetuity. |
| 2. | endless or indefinitely long duration or existence; eternity. |
| 3. | something that is perpetual. |
| 4. | an annuity paid for life. |
| 5. | Law. an interest under which property is less than completely alienable for longer than the law allows. |
| per·pe·tu·i·ty (pûr'pĭ-tōō'ĭ-tē, -tyōō'-) n. pl. per·pe·tu·i·ties
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Perpetuity
A constant stream of identical cash flows with no end. The formula for determining the present value of a perpetuity is as follows:
Investopedia Commentary
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).
Related Links
Digging Into The Dividend Discount Model
Understanding The Time Value Of Money
The Importance of Time Value
See also: Annuity, Dividend Discount Model - DDM, Maturity Date, Perpetual Bond, Present Value - PV
perpetuity
pɪˈtu