Discount rates will vary based upon your own personal level of risk tolerance. For example, I might be willing to buy a risky stock if I think I’ll earn 10% while my wife would need at least 20%

Discount rates will vary based upon your own personal level of risk tolerance. For example, I might be willing to buy a risky stock if I think I’ll earn 10% while my wife would need at least 20% before she’d consider it. What’s your discount rate for the following types of equities? How did you determine that rate?

 

a) A risk free equity (a US Treasury Note – called risk free because if they can’t pay, your money is worthless!)

  

b) A CD at a South American bank paying in their local currency.

  

c) A stock in a company that has a secure stream of income from a long term contract customer. 

   

d) A stock in a company that has an interesting business plan but no real operations as of yet (as NY Lotto says “A Dollar and A Dream”)

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