What factors affect the current value of persistence?

Eternity is a financial asset that will pay forever at the agreed rate. It is more of an economic model than reality. The current permanent value can be calculated by a simple formula involving payment to be made every year and a discount rate. The selection of the discount rate is somewhat subjective, which means that the calculation of the current value of eternity is not an objective process. In the valuation of annuity, most analysts actually take into account the age of the person, gender and health to solve the expected lifetime and then assume how long the payment will take. To consider the annuity as eternity is rather a mathematical concept that works on the basis of payments in fact after an endless period. This is not necessarily a realistic perspective, but the confusing perspective reflects uncertainty. There are some actual loyalty, such as British war bonds that cannot be applied for their nominal value but can be traded, and theoretically will continue to pay the annual amount of existing holdEli forever.

Financial analysts often try to develop the current value of an asset that pays a fixed amount. For example, an analyst may try to put value on a bond that pays a certain amount for each of the next 10 years. This award may take into account the fact that the person must wait for money, the risk that payments will not be made as promised, and the return that the person could make by putting money into a risk or extremely low -resistant investment instead. Investors and analysts can compare this award with the market price of assets to see if it is a useful investment, on paper in Least.

At first glance, it may seem impossible to calculate the current value of persistence, because one of the participating factors - the number of years of payment - is infinity. The calculation of the calculation involving infinity does not normally produce a usable result. In practice, howeverThe time increases for each additional year of payments, slows down every year and eventually becomes so low that it is effectively worthless.

The calculation of the current value of eternity is therefore a simple formula: the amount to be paid each year, divided by a discount rate. The discount rate is a percentage that is selected subjectively. In connection with the annuity, it will usually take into account the predominant interest rates for other investments, along with the modification to take into account the risk that payments will not be made as promised, for example, if the Anuity provider goes into liquidation. For example, if interest rates are low Annita provider is the national government, the discount rate will be lower, which means that the current value of permanence is higher. This is because it is not only very likely that payments will continue as promised, but payments will seem more enriching compared to other investments.