Ad Infinitum

AAA

DEFINITION of 'Ad Infinitum'

A Latin phrase meaning "to infinity" - in other words, forever. In finance, the term is associated with a perpetuity, in which the payments derived from an asset at fixed intervals are assumed to go on forever and ever, or ad infinitum.

INVESTOPEDIA EXPLAINS 'Ad Infinitum'

Payments received ad infinitum do indeed go on a very long time. But it's important to realize that, because of the time value of money, the present value (i.e, the value today) of those payments very far off in the future (say, 50 years from now) is negligible. Thus the present value of an ordinary annuity (i.e., one with a fixed end) of 50 years is not very much less than that of a perpetuity whose payments go on ad infinitum.

RELATED TERMS
  1. Perpetual Preferred Stock

    A type of preferred stock that has no maturity date. The issuers ...
  2. Ordinary Annuity

    A series of equal payments made at the end of each period over ...
  3. Perpetuity

    A constant stream of identical cash flows with no end. The formula ...
  4. Perpetual Bond

    A bond with no maturity date. Perpetual bonds are not redeemable ...
  5. Monthly Income Plan - MIP

    A type of investment vehicle that provides a specified monthly ...
  6. Current Liquidity

    The total amount of cash and unaffiliated holdings compared to ...
Related Articles
  1. Calculating The Present And Future Value ...
    Investing Basics

    Calculating The Present And Future Value ...

  2. Understanding The Time Value Of Money
    Investing Basics

    Understanding The Time Value Of Money

  3. Selecting The Payout On Your Annuity
    Options & Futures

    Selecting The Payout On Your Annuity

  4. Why do companies issue 100-year bonds?
    Investing

    Why do companies issue 100-year bonds?

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center