Perpetuity

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Annuity dueAn annuity whose payments fall at the beginning of each period rather than the end, which makes it worth more than an otherwise identical ordinary annuity.
• CAGRThe single smoothed annual rate at which a starting value would have to grow, compounding each year, to reach the ending value over a given period.
• Convertible debenturesDebentures that turn into equity shares on terms fixed at issue — the investor draws a coupon until conversion, and the company settles the debt in shares instead of cash.
• Credit riskThe risk that a borrower fails to meet its obligations on a debt instrument — the risk credit rating agencies exist to grade, and the one that triggers a segregated portfolio in a mutual fund.
• Face valueThe denomination a company's capital is divided into and carried in its books — fixed, printed on the certificate, and the base on which dividend percentages and stock splits are computed.
• Future valueWhat a sum of money invested today will be worth at a future date once returns have been earned and reinvested — the compounding half of the time value of money.