ST Alpha - "it's the annual value of the next-best investment of the cash. " (Reading a Post)

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In response to "(Can you explain a little more) -- nm" by James Bond (aka Igor)

it's the annual value of the next-best investment of the cash.

Posted by amanda "internet" jones (aka amanda) Feb 9 '11, 17:07

I use the interest rate on my lowest-interest credit card. some people use a five year average on their portfolio, but in the last five years the market's been everywhere. I would rather just use cost of debt.

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fwiw, the major miners use 6% for developed world, 10% for places with high country risk, and that's based on about a century of operational history. -- nm - mafic Feb 9, 17:38 2
- sure, because their roi is predictable based on history, and their portfolios are varied enough to mitigate some risk. - amanda "internet" jones Feb 9, 17:46 1
  - absolutely. I'm just always fairly conservative with it. - mafic Feb 9, 17:52
Why can't you say: I will have $10 in my account in 5 years. For me to get $10 in 5 years, I would need $9.06 in my account at 2% interest. - James Bond (aka Igor) Feb 9, 17:10 8
- sure, you can. but what interest rate do you use? isn't that what you asked? - amanda "internet" jones Feb 9, 17:19 7
  - Oohhhh.. I see now. Sorry I got confused. You used the interest rate from credit cards. While I was thinking of an like a CD account. - James Bond (aka Igor) Feb 9, 17:23 3
    - so like what I'm saying is "what would you get for the money if not spending it on tuition and interest? -- nm - amanda "internet" jones Feb 9, 17:24 2
      - Right. Thank you. -- nm - James Bond (aka Igor) Feb 9, 17:25
      - oops. it's a combination of the cost of your debt and your equity. I use credit card rates for me. YMMV. -- nm - amanda "internet" jones Feb 9, 17:25
  - just give him the bottom line! -- nm - cupixie Feb 9, 17:20 2
    - he's using like a bank interest rate. he has his answer. I use different numbers because I make different assumptions and have different risk toleranc -- nm - amanda "internet" jones Feb 9, 17:22 1
      - Yes, makes sense. Thank you. -- nm - James Bond (aka Igor) Feb 9, 17:24
wiki says it well. - amanda "internet" jones Feb 9, 17:09

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it's the annual value of the next-best investment of the cash.

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