3 ms·
Even 1 day paper uses annual rates. http://www.federalreserve.gov/releases/cp/ http://www.federalreserve.gov/releases/cp/ When your cost of money is 30000 bas
by mynameishere 16y ago
Even 1 day paper uses annual rates.
http://www.federalreserve.gov/releases/cp/ http://www.federalreserve.gov/releases/cp/
When your cost of money is 30000 basis points, it just means that you're shifting default risk from the landlord/doctor/drug dealer to a speculator, aka "loanshark". That's why it's not so predatory as it seems. Would you rather people shaft the dentist or some asshole?
- mdda 16y agoI work in the (junk) bond markets. There's a clear distinction between Yield-to-Call paper (which is priced so that different bonds are priced based on the yields they offer) and paper that trades on a 'price basis' (i.e. recovery rates in default are a very major consideration). For the 'price based' bonds, the APR (or IRR) is a nonsense measure : because it is only considering the best outcome (payback at maturity). Most people don't understand that the high IRRs exist partly because people are bundling the price-effect of the downside case into the single 'yield' number of the best case. I don't want to defend payday loans really - just point out that Treasury Bonds and (say) Lehman bonds are two very different animals.