A perpetuity 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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Long position

An options position where a person has executed one or more option trades where the net result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the number of contracts sold). Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."

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