What Are Perpetual Investments?

Permanent bonds are also called "annuity bonds", which refer to bonds that have no maturity and pay interest indefinitely and indefinitely. Perpetual bonds are usually accompanied by coupons, and those who purchase this bond cannot request repayment of the principal and can only receive interest income on schedule. Therefore, some people with a considerable amount of monetary funds do not want to invest in production themselves, and often buy them as permanent bonds in order to make regular profits and pay expenses. Such people are called "coupon cutters." But such people are rare now, and of course, there are very few permanent bonds. The only noteworthy permanent bond in existence is the unified public debt issued by the Treasury. ^[1]

Permanent bond

Permanent bonds are similar in nature to stocks and can be obtained

Holders of permanent bonds, except for finding that the company is bankrupt or have a major financial event, generally cannot demand repayment from the company, but can only obtain it on a regular basis.

The formula for calculating the value of permanent bonds is as follows:

PV = C / k

Among them, C is the annual interest amount of the bond (equal to the face value *

Suppose there is a permanent bond with a face value of 1,000 yuan, an annual interest rate of 8%, and an investor's required annual investment yield of 10%. What price is the investor willing to accept?

Solution: Given C = 1000 × 8% = 80 yuan and k = 10%, then:

PV = 80 / (10%) = 800 (yuan)

That is, as long as the bond market price does not exceed 800 yuan, the investor will buy the bond.