Different Types of TVOM


Perpetuity is similar to annuity. The only difference between annuity and perpetuity is the ending period. For annuity, payments last for a certain period, whereas for perpetuity, they continue indefinitely, as represented by (∞).

Timeline with r, C at each of 1,2 3, an arrow pointing to infinity, and P V infinity at zero.

The equation below is used to calculate present value of perpetuity. It requires only the first payment and interest rate.

P V infinity equals numerator C denominator r