How to Calculate the Interest Rates on Perpetuity

By Motley Fool Staff – Updated Oct 4, 2025 at 10:14 PM EST

Key Points

Perpetuities pay a fixed annual sum; interest rate calculated by dividing payment by price.
Example: $5,000 annual perpetuity for $60,000 has an 8.33% interest rate.
Validate investment value using Present Value formula, confirming fair price.

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Illustration of percent sign — Image source: Getty Images.

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The present value of an annuity formula allows us to check our math when calculating an interest rate on a perpetuity. It also enables us to determine what someone should pay for a perpetuity, given an annual payment and a suitable interest rate or return.

At any rate, our calculated interest rate of 8.33% is correct, since the present value of $60,000 is equal to the present value we were given to use in the first formula.

Put this information to good use by investing!

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