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Present Value of a Perpetuity Calculator

LAST UPDATE: September 29th, 2018

Present Value of a Perpetuity Calculator

What is a Present Value (PV) of a Perpetuity?

Present value (PV) of an annuity is a financial calculation used when determining the “today” value of a set of annuity payments that occur each compounding period that goes on forever.
As this calculator is structured to parallel the results of a financial calculator, inputs and outputs will be similar – for example, a negative present value (or payment) means an outflow as opposed to a directly negative number.

How is the Present Value of a Perpetuity calculated?

The PV of a perpetuity is calculated through a financial formula used with the time value of money.
\text{Present Value} = \frac{\text{Payment Amount}}{\text{Interest Rate}}

Example

We will receive a perpetuity of $100 each year. The interest rate at the moment is 2.2% compounded annually. What is the present value of this perpetuity?
\text{Present Value} = \frac{100}{0.022}
\text{Present Value} = 4545.45

What is the rate?

The rate is the amount of interest earned per compounding period.

What is Payment (PMT)?

A payment is an amount either deposited or withdrawn at each compounding period. A negative number designates an amount that is deposited, while a positive one withdrawn. For example, if $100 is deposited each compounding period, it would be entered as '-100', while if $75 was payed out each compounding period, it would be entered as '75'.

Sources and External Resources

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