Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Tyl
In order for the government to borrow money, they would need to provide an incentive for the savers to lend. Example, if you want to borrow from me what incentive would I have to lending you my money? --- john hull [EMAIL PROTECTED] wrote: For some reason, I can't get it straight in my head

Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Sampo Syreeni
On 2003-12-05, john hull uttered: For some reason, I can't get it straight in my head why the risk-free rate of interest would be higher than zero. The easiest example I know of is, would you be happy saving all of your income for the next year, without receiving a formidable compensation?

Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Fred Foldvary
On 2003-12-05, john hull uttered: For some reason, I can't get it straight in my head why the risk-free rate of interest would be higher than zero. The easiest example I know of is, would you be happy saving all of your income for the next year, without receiving a formidable compensation?

Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Marko Paunovic
Let's see first what the risk-free interest rate really is. It depends on two conditions. One condition is that the borrower will certainly repay the money. The other condition is that the lender will certainly be alive to collect it when the time comes. That is probably the strongest reason

Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Fred Foldvary
--- Marko Paunovic [EMAIL PROTECTED] wrote: In a risk-free world I can't fail. Risk-free interest is quite different from a risk-free world. We need to assume the usual risky world, but a loan that is sure to be repaid and with the interest sure to be paid, which US treasury bonds currently

Re: Why is a dollar today worth more than a dollar tomorrow?

2003-12-05 Thread Marko Paunovic
OK. Then, as long as the expected profit from building a factory is higher than zero, I would not lend the money at zero interest rate. Maybe to make a point more clear. As long as there is some opportunity for me to invest in a project with positive expected profits (whatever it is - building a