PV of Perpetuity = — r where A is the perpetuity. The most common example offered for a perpetuity is a console bon. A console bond is a bond that has no maturity and pays a fixed coupon. Assume that you have a 6% coupon console bond. The value of this bond, if the interest rate is 9%, is as follows:

The value of a console bond will be equal to its face value (which is usually $1000) only if the coupon rate is equal to the interest rate.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

Get My Free Ebook

Post a comment