General Mathematics · annuities · demo

A perpetuity spends only the interest

Each period the interest earned on A is paid out as P. The principal does not move — so A = P/i.

Perpetuity Period 0

Interest earned

Principal A

Payment out

n	Opening A	Interest in	Payment out	A after

Amber = interest generated · teal = payment. In a perpetuity those two match, so A does not move.

A = P / i

—

Mode

Payment P equals the interest iA — principal stays put.

Parameters

Payment P $1000

i (per period) 5%

This period

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