perpetual annuity

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The receipt or payment of a constant annual amount in perpetuity. Although the word annuity refers to an annual sum, in practice the constant sum may be for periods of less than a year. The present value of an annuity is obtained from the formula:

P = (a × 100)/i,

where P is the present value, a is the annual sum, and i is the interest rate.

Subjects: Financial Institutions and Services — Accounting.

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