The inflation is irrelevant to this discussion as he is borrowing to invest.
inflation is simply irrelevant.
He borrows €100k and invests €100k. He makes a profit of €2k. He pays off his loan and still has €2k in the bank.
You are confused about the need to preserve the real value of money. If I have €100k cash to invest and get a return of 4%, while inflation is 6%, my real return is -2%.
But inflation works on both sides - the borrowings and the investment, so it's simply not relevant.
Brendan
inflation is simply irrelevant.
He borrows €100k and invests €100k. He makes a profit of €2k. He pays off his loan and still has €2k in the bank.
You are confused about the need to preserve the real value of money. If I have €100k cash to invest and get a return of 4%, while inflation is 6%, my real return is -2%.
But inflation works on both sides - the borrowings and the investment, so it's simply not relevant.
Brendan
inflation is simply irrelevant.
He borrows €100k and invests €100k. He makes a profit of €2k. He pays off his loan and still has €2k in the bank.
You are confused about the need to preserve the real value of money. If I have €100k cash to invest and get a return of 4%, while inflation is 6%, my real return is -2%.
But inflation works on both sides - the borrowings and the investment, so it's simply not relevant.
Brendan
Regarding your point about it being risky in case one bank went bust. Would it not be safer depositing money in many different bank accounts rather than all in one (unless it Northern Rock of course).
As no mathematicians are volunteering them selves to help me out, I will try to crunch the numbers myself. Can someone let me know how you calculate a years interest in one of these regular savers accounts. For example 1,000 per month for 1 year in Anglo s 8% account ?
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