Documentos de Académico
Documentos de Profesional
Documentos de Cultura
Buffett.
Risk and discount rates: Theoretically and Psychologically as risk increases one expects
higher returns, but Buffett doesnt seems agreeing with this fact. He argues that there is
no risk if you understand what are you doing and thus he values the assets at risk free rate
i.e. 30 year treasury bonds. But having the complete understanding of characteristics of
underlying asset is not possible, there is always lack of information regarding the asset
performance and hence risk is attached with the asset which should be compensated by
higher discount rate.