Talk:Perpetuity

From Wikipedia, the free encyclopedia

When is common shares like a bond

Contents

[edit] Can we add a formula?

Would be good to have the formula for a perpetuity in the article - Present Value (perpetuity) = Annual Cash Flow / discount rate

PV = CF / r Jeffme 05:21, 12 November 2006 (UTC)

Done. Though it might be confusing as it is preceded by the sentence from an earlier author, "Additionally, because the principal is never repaid, there is no present value for the principal." -B0mbrman 17:43, 20 June 2006 (UTC)

B0mbrman - I'm not sure I'm happy with that sentence - a perpetual annuity does have a present value (as demonstrated by the formula shown). I'd appreciate peoples' thoguhts on removing this sentence. Foggy1974 15:59, 12 July 2007 (UTC)

The sentence is techically correct, but I think what may have got misplaced in edits is the comparison with a typical bond, which has a principal that is repaid at the final maturity date. Take a look at the change I've made and see if it makes more sense now.--Gregalton 16:49, 12 July 2007 (UTC)

[edit] Huh?

This article seems like it was written by financial geeks for financial geeks. Could someone please simplify it so the ordinary reader can understand it. Perhaps someone could give a step-by-step example of the calculation, and break out exactly what PV, A, and r represent. What is 'A'? Is it the dividend yield? What is 'r'? Also, the U.K.-specific stuff makes it confusing. I have no idea what a "pence per pound" is. Why do I care if the bond is used for war or not? 130.76.96.14 00:48, 1 August 2006 (UTC)


Yes, this page is by financial geeks, for financial geeks. I'm not sure why you would be researching perpetuities if you're not a financial geek. Hydraskull 18:21, 3 May 2007 (UTC)

[edit] Savings account not a perpetuity

Savings accounts are not generally considered perpetuities because the rate paid (the periodic cash payment) is not fixed, but will fluctuate at the will of the bank. And, there is a surrender value (the cash amount of the deposit) that is a fixed amount. So I will remove this unless there is a better reason to leave it.--Gregalton 22:42, 2 January 2007 (UTC)

[edit] Rule Against Perpetuities

No idea why there's a link to the rule against perpetuities from this page. I can't see why it's at all relevant (it's a property law thing, and has nothing to do with a perpetuity in a financial sense). Eionm 17:38, 26 April 2007 (UTC)

[edit] Perpetuity with Variable Payment amount?

Would this ever happen? I.E., a stock that pays annual dividends forever, with each dividend being 3% greater than the previous dividend. Is there a formula to determine the present value for that?Hydraskull 18:28, 3 May 2007 (UTC).

See the time value of money pages. A variable perpetuity, no; a perpetuity with a fixed rate of growth is easy: instead of A / r, it's A / (r-g). Note that g must be smaller than r and there are some other restrictions or the answers can become nonsensical or undefined.--Gregalton 21:52, 3 May 2007 (UTC)

[edit] Duplicating information in page titled 'Perpetuity'?

The page 'Perpetutity' seems to duplicate some of the information here. As a Perpetual Bond is, in effect, a Perpetuity, should we merge these two pages and redirect one page to another?

Foggy1974 15:59, 12 July 2007 (UTC)