Annuity and Perpetuity
Annuity refers to a constant cash flow repeated for t periods. Annuity with no growth PV(Annuity) = A * 1/r * [1 - 1/(1 + r)T] FV (Annuity) = (1 + r)T * PV(Annuity) Annuity with growth rate g PV(Annuity) = A * [1/r-g [1 - (1+g/1+r)T]] (if r != g) PV (Annuity) = A * T/1+r ( if r = g) Perpetuity is an annuity with infinite maturity Perpetuity with no growth PV(Perpetuity) = A/r Perpetuity with growth rate g PV(Perpetuity) = A/r-g (r>g)