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Consol

• A type of bond that has an infinite life but is not issued in the U.S. capital markets.

 
 Embedded terms in definition
 Bond
Capital market
Capital
Type
U
 
 Referenced Terms
 Perpetuity: A constant stream of identical cash flows without end, such as a British Consol.An annuity with an infinite life, involvng equal and periodic (regular) cash flows.Infinitely many cash flows of identical magnitude. First cash flow starts next period. Examples of securities that provide cash flows in perpetuity would be perpetual preferred stocks, Consol bonds (which have no maturity dates), and stock dividends if all dividends have the same magnitude.Is a stream of payments or a type of annuity that starts payments on a fixed date and such payments continue forever, or perpetually. Often preferred stock which pays a dividend is considered as a form of perpetuity. However, one must assume that the firm does not go bankrupt or is otherwise impeded for making timely payments. The formula for evaluating a perpetuity is relatively straight forward. It is simply the expected income stream divided by a discount factor or market rate of interest. It reflects the expected present value of all payments. It is comparable to a perpetual bond or Consol in this respect. If a preferred issue pays a $2.00 quarterly dividend and the annual interest rate is 5 percent then one would expect to be willing to pay 2.50/.0125, or $200 per share. Here, the 5 percent interest rate was adjusted for a simple quarterly disbursement (.05/4 = .0125).

 Perpetuity: A constant stream of identical cash flows without end, such as a British Consol.An annuity with an infinite life, involvng equal and periodic (regular) cash flows.Infinitely many cash flows of identical magnitude. First cash flow starts next period. Examples of securities that provide cash flows in perpetuity would be perpetual preferred stocks, Consol bonds (which have no maturity dates), and stock dividends if all dividends have the same magnitude.Is a stream of payments or a type of annuity that starts payments on a fixed date and such payments continue forever, or perpetually. Often preferred stock which pays a dividend is considered as a form of perpetuity. However, one must assume that the firm does not go bankrupt or is otherwise impeded for making timely payments. The formula for evaluating a perpetuity is relatively straight forward. It is simply the expected income stream divided by a discount factor or market rate of interest. It reflects the expected present value of all payments. It is comparable to a perpetual bond or Consol in this respect. If a preferred issue pays a $2.00 quarterly dividend and the annual interest rate is 5 percent then one would expect to be willing to pay 2.50/.0125, or $200 per share. Here, the 5 percent interest rate was adjusted for a simple quarterly disbursement (.05/4 = .0125).

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