You buy a perpetual bond (perpetuity) and the first payment will be $1,000 four years after purchase. Your payments would increase like this: Perpetuity growth, and knowing how to calculate the value of a growing perpetuity, has many applications. Regardless of your political stance on unions, one thing most union jobs offer that other jobs do not is pensions. The formula to find the present value of a growing perpetuity is: Amount of the first payment / (Discount rate Growth rate) = Present value of an increasing perpetuity. Im not a savvy investor and would like to know how (the steps needed) to invest in treasury bonds and how (the steps needed) to withdraw 3 percent per year. You can use perpetuities to calculate the value of an endless stream of cash payments. Calculate R. ho O 1.7 O 1.9 2.1 2.3 2.5. You can use perpetuities to calculate the value of an endless stream of cash payments. Browse other questions tagged, Start here for a quick overview of the site, Detailed answers to any questions you might have, Discuss the workings and policies of this site. 'use strict';var cls_disable_ads=function(n){function h(a,b){var c="function"===typeof Symbol&&a[Symbol.iterator];if(!c)return a;a=c.call(a);var d,e=[];try{for(;(void 0===b||0