Annuitization

finance a la shmoop. what is a perpetuity? forever. that's what you should think

when you hear the word perpetuity. well a perpetuity is a cousin to an annuity.

in an annuity you invest a given amount of money and then you get a portion of [100 dollar bill]

that dough paid out to you over a set number of years, or in the vein of a life

insurance policy it gets paid out until you are you know doing backstroke Six

Feet Under. and annuity sunsets well basically when you. do but a perpetuity [skeleton in the ground]

outlives you. it pays forever even when you're dead. so why would anyone want one

of these things? well they work for university scholarship endowments. you

know like think about a great Italian literature philanthropist named well

let's say Bella pepperoni. no offense to our Italian shmoopers out there. she made [woman wears name tag]

her fortune analyzing the works of Dante and Machiavelli and wants to endow a

scholarship for other PhDs in Italian Lit forever. well she'd put in say a

million bucks and it might get invested in half and bonds half in stocks with

yield and the throw from that million bucks might be something like a four or

five percent a year or forty or fifty grand and that would be more than enough [equations on screen]

to cover the basics for a PhD in Italian lit well more or less forever as

dividends get raised in stocks bro and all that stuff. the million bucks just

remains invested 50/50 stocks and bonds and the world continues to spin so yeah

even when she's no longer around to enjoy the fruits of her labor as well [headstone shown]

that fruit doesn't spoil develop mold and start to smell bad even if we can't

say the same for her. sorry. just keeping it real. [woman's picture next to casket.]

that's perpetuity. goes forever. perpetual.