Re:Capital Inefficiency
by steveBK123 on Sunday October 08, 2023 @06:55PM
(#37815155)
Not quite right.
I'd argue the reason you want higher margins in a higher interest rate environment is the "risk free rate" is now higher.
If the risk free rate is basically 0%, you'll invest in a risky business that makes 5% margin. If the risk free rate is 5%, now you want the risky business investment to have 10% margin to be worth the same investment.
I'd argue the reason you want higher margins in a higher interest rate environment is the "risk free rate" is now higher.
If the risk free rate is basically 0%, you'll invest in a risky business that makes 5% margin. If the risk free rate is 5%, now you want the risky business investment to have 10% margin to be worth the same investment.