Talk:Perpetuity

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)

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)

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)

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)

Floating rate perpetuities, known as income securities or hybrid securities, are traded on the Australian Securities Exchange. BOQPC and NABHA are examples. They generally pay a fixed premium to the current interbank 3 month rate. Qemist (talk) 04:16, 8 April 2009 (UTC)

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)

Add example of motivation behind issuing a perpetuity

I would like to know the motivation behind issuing/creating a perpetuity - it's basically a paper that guarantees that you get a fixed amount of money every x amount of time (inflation price fix included?). Why would anyone issue a perpetuity in the first place, I can't see the benefit of it long time. Would help me in better understanding the topic if an historical example (Britain) was included in the article on the why. Thanks, --SkyHiRider (talk) 20:38, 23 February 2012 (UTC)

They were really hard up on cashes. Hence the use for war. The interest rate is peanuts. Really I have no idea, I would like to know. Sagittarian Milky Way (talk) 00:26, 11 December 2012 (UTC)

Merger proposal

The following discussion is closed. Please do not modify it. Subsequent comments should be made in a new section. A summary of the conclusions reached follows.

To not merge, as the differences are such that readers are best served by having separate articles. Klbrain (talk) 10:39, 3 April 2023 (UTC)

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Consol (bond) Perpetual bond and Perpetuity are all too close, and should be merged into one single page. --cfp (talk) 12:33, 10 June 2022 (UTC)

• I think that Consol (bond) should remain separate as it is a particular type of historical perpetual bond (from either the US or UK government), and is sufficiently distinctive to be discussed independently. I agree, though, that Perpetual bond and Perpetuity heavily overlap and are best merged. Klbrain (talk) 14:48, 6 November 2022 (UTC)
• Generally think they should all be kept separate as Perpetual Bond is slightly different to Perpetuity, but no strong opinion. If they were going to be merged I think the final article should be Perpetual Bond as this has a more globally recognised name. Sargdub (talk) 02:14, 26 January 2023 (UTC)
• Definitely should be kept separate. As I understand it, the purpose of Wikipedia is not to build a logical structure that contains and relates all human knowledge, but rather to make knowledge available to people who seek it. This morning I read an article that caught my eye about Yale's perpetual Dutch bond ("Infinity has a price", Yale Alumni Magazine March/April 2023). I was left struggling to understand how it could ever make sense to issue such an instrument because the magazine article didn't address the topic at that fundamental level. Naturally, my first thought was "look in Wikipedia." So into the search box I typed the most simple descriptor -- the same one the Yale Magazine had used in it the first line of the article -- "perpetual bond". Bingo! My trust in Wikipedia was justified. In the very first line some Wikipedian(s) went right to the core issue: this instrument in some ways is like equity, and in others like debt. Yes, admittedly even though I didn't know the term "consol", if redirection was properly set my search probably would have pointed to the proposed combined article. But then I'd be left trying to sort out a complicated maze of terminology which is only tangential to the essence of "perpetual bond". We can't lose sight of access, it is the essence of Wikipedia. Everyone who comes to the short article on "Perpetual Bond" will have an opportunity to follow the links to "Consol (bond)" and "Perpetuity" (bond, not sculpture), and further and deeper as they may choose.Paugus (talk) 17:25, 11 March 2023 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.