nat r said:It really doesn't matter what discount rate you use, the more important factor is that the yield on the CMT will be lower than the cost of funds from the bond holders and the yield on the funds advanced to the borrowers is zero....all up the assets yield less than the liabilities.
Natr - think you have misunderstood my previous posts.
I used the example of a PI using annuitiies (an income stream) to fund further borrowing - my point was that this would be successful if the return on investment is greater than the cost of fund...
If a PI can follow this strategy successfully why can it be applied on a larger scale?
Of course what you say is true - but where are you getting the information regarding the companies costs of funds, returns etc?
That is what all of my posts have been asking - Im attempting to understand the assumptions you are making...