Serious question: If I wanted to buy 10% of your income for the next 10 years (let's assume this was possible pre-tax), how much would you charge me in up-front cash for that?
So basically you'd take the bet that your salary isn't going to increase much
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The opposite. I know my salary will increase over 10 years so I would rather give you all 10% up front not over 10 years. That protects any wage increases I receive from you, the borrower.
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No you have it backwards. I'm writing a check to you. Today. In exchange for 10% of your future earnings. How big does that check have to be?
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Oh ok, I apologize. I would calculate, to the best of my ability, the present value of those future earnings at the 10 year US bond rate. Assume you get a total of 100k over 10 years from me. I would charge you about 78k.
End of conversation
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