per⋅pe⋅tu⋅i⋅ty
[pur-pi-too-i-tee, -tyoo-] 
pɪˈtu
| 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. |
Based on the Random House Dictionary, © Random House, Inc. 2009.
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| per·pe·tu·i·ty (pûr'pĭ-tōō'ĭ-tē, -tyōō'-) n. pl. per·pe·tu·i·ties
|
Copyright © 2009 by Houghton Mifflin Company.
Published by Houghton Mifflin Company. All rights reserved.
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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. A path to perpetuity of fame. --Byron. The perpetuity of single emotion is insanity. --I. Taylor. 2. Something that is perpetual. --South. 3. Endless time. "And yet we should, for perpetuity, go hence in debt." --Shak. 4. (Annuities) (a) The number of years in which the simple interest of any sum becomes equal to the principal. (b) The number of years' purchase to be given for an annuity to continue forever. (c) A perpetual annuity. 5. (Law) (a) Duration without limitations as to time. (b) The quality or condition of an estate by which it becomes inalienable, either perpetually or for a very long period; also, the estate itself so modified or perpetuated.Cite This Source
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
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perpetuity
- A stream of payments that is expected to last indefinitely.
Copyright © 2003. Published by Houghton Mifflin.
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Main Entry: per·pe·tu·i·ty
Pronunciation: "p&r-p&-'tü-&-tE, -'tyü-
Function: noun
Inflected Form: plural -ties
1 : the quality, state, or duration of being perpetual
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 vesting of an estate; also : a limitation that gives rise to such a situation b : an estate that will not vest within the period fixed by law —see also RULE AGAINST PERPETUITIES, STATUTORY RULE AGAINST PERPETUITIES
3 : an annuity payable forever
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