Comment on Bank Workers, Rejoice!

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MrMakabar@slrpnk.net ⁨2⁩ ⁨days⁩ ago

The further in the future profits are, the less they are worth today. As in getting $1000 today is better, then getting a promise of being paid $1000 in a decade. After all if you got the $1000 today you could have invested it and got a return on it. So lets say you know you can get a return of a rate of 5%. The $1000 today invested over a decade would be $1000 * 1.0510 = $1628.89 in a decade. You can also use it the other way around, to estimate what the $1000 is worth in the future. As in X * 1.0510 = $1000 -> X =$613.91 That rate of return is called the discount rate.

The issue with getting money in 50 years is that it ends up being nearly nothing today. So it is just a horrible idea.

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