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It's a faith based investment. With a treasury, you are still hoping that the government won't default, which is why some government's notes have higher rates t
by everdev 8y ago
It's a faith based investment. With a treasury, you are still hoping that the government won't default, which is why some government's notes have higher rates than others. Same thing with municipal bonds.
The market determines the price of anything based on supply and demand (which includes a risk calculation).
- Blackstone4 8y agoThere's a difference between the market price and valuation. “Price Is What You Pay, Value Is What You Get” An investor might determine what they would be willing to pay for an asset (i.e. a fair valuation) and compare it to the market price. If it's selling for less than what they believe to be fair market value then it's a buy. The same methodology can be applied to sell decisions. If I buy a house to let, I can create a model to project future cash flows derived from rent, costs, taxes etc. I can then discount the cash flows (DCF) with my target rate of return to get a valuation. Yes there are variables that are difficult to take into account i.e. likelihood of government default. It's not possible to apply a cash flow valuation to BTC. Yes there is a market which determines the price of something. But that does not necessarily result in a reasonable price.