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risk and reward are commensurate in a free market, otherwise someone will arbitrage until it does. the man who risks only .00001% of his wealth only stands to
by nazgulnarsil 16y ago
risk and reward are commensurate in a free market, otherwise someone will arbitrage until it does. the man who risks only .00001% of his wealth only stands to gain .000001% of his wealth. yes, banks are able to diversify their risk over a huge number of borrowers, thus they are able to offer much lower rates than would ever be realistic in a scenario that 1-to-1 matched specific borrowers and lenders. they thus make more capital intensive ventures more accessible.
- loewenskind 16y ago>risk and reward are commensurate in a free market, otherwise someone will arbitrage until it does Would you mind providing a citation that proves this? Also I'd like to know what you mean by "free market". Are you speaking hypothetically here, or relatively? >the man who risks only .00001% of his wealth only stands to gain .000001% of his wealth. Nonsense, how do you come up with such a number? How much the man stands to gain is unbounded. If for example, some investor's .00001% was $100k, with which he bought 20% of a company that ended up being the next goggle then he would make billions from thousands.
- nazgulnarsil 16y agoif if if