tag:blogger.com,1999:blog-33399132.post4692258130572950441..comments2024-03-04T08:09:21.453-08:00Comments on Richard's Real Estate and Urban Economics Blog: How choosing the right discount rate matters to Max ScherzerRichard Greenhttp://www.blogger.com/profile/02161226214739034402noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-33399132.post-75465758791814479672015-01-20T06:22:46.832-08:002015-01-20T06:22:46.832-08:00This source provides a lower AAA effective yield t...This source provides a lower AAA effective yield than 2.8%:<br /><br />http://research.stlouisfed.org/fred2/series/BAMLC0A1CAAAEY<br /><br />The Federal Reserve (using a long-term Moodys series) gives higher rates for both AAA and BBB. Given the steepness of the current term structure, this is not surprising.ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.comtag:blogger.com,1999:blog-33399132.post-22327506124059830212015-01-20T06:20:10.359-08:002015-01-20T06:20:10.359-08:00Isn't this source giving an even lower AAA eff...Isn't this source giving an even lower AAA effective yield?<br /><br />http://research.stlouisfed.org/fred2/series/BAMLC0A1CAAAEY<br /><br />The Federal Reserve notes that the Moody's series for these yields are higher. But this all gets into the term of the bond. And with the current steep term structure, that matters. ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.comtag:blogger.com,1999:blog-33399132.post-1285779016139963782015-01-20T05:43:44.544-08:002015-01-20T05:43:44.544-08:00The 'right' discount rate also depends on ...The 'right' discount rate also depends on Scherzer's own preferences and opportunity costs. He may view this annuity as preferable to $130 million today that he can then invest in some portfolio of assets which will provide X rate of (expected) return. It's that breakeven point that is 'right' for Scherzer, but good luck finding that out.The Oriole Wayhttps://www.blogger.com/profile/16483309131692836436noreply@blogger.com