What Is the Present Value of a Perpetuity Formula and What Are Perpetuities?

First of all, what is the ordinary meaning of "perpetuity?" It simply means "forever." So in finance, what do we mean by this same concept? Well, imagine I gave you a piece of paper or certificate, and that paper promised that I would pay you a fixed amount every year, forever. That piece of paper is called a "perpetuity."

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