Perpetuity

What it means

An annuity with no end date — a level cash flow received forever.

The exam angle

Only valid where r > 0 and the payment is level. A growing perpetuity uses C / (r − g), and requires r > g or the value is meaningless.

Where it appears in the syllabus

• Quantitative MethodsCFA Level I · exam weight 11–14% · Returns and benchmarks, time value, distributions, portfolio maths, regression.
• EquitiesCFA Level I · exam weight 11–14% · Market organisation, indexes, industry analysis, dividend models.

On the calculator

Time value of money questions on the BA II Plus come down to five keys and a few traps (payments per year, BGN mode, the sign of cash flows). Watch the keystrokes video.

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