Because that is the rate a default free government should be paying on its bonds. If a government has 100 income, with growth of 4 % and inflation of 10%, it will have 114 next year. So it can pay back 14% (4+10)
With all due respect, I believe that following what you teach, by subtracting the bonds in dollars from country X with the US bond rate, we obtain a rate in dollars, if we subtract that rate from the bond rate of country X and those bonds are in the currency of country X, we would be mixing rates in dollars and rates in the currency of country X, which I think could be a mistake, we should not pass the rate (difference between bonds that are in dollars) to the country's currency X through inflation (do I discount that of the USA and add the inflation of country X with the formula that you teach?)
Hi, thanks for all the great educational posts and materials. I also wanted to let you know that the post class test and the test solution is generation a not found page. Thanks
@@AswathDamodaranonValuation Heyy! Professor, I have a query. Right now India is have lower inflation than US, so why Indian Risk free rate is higher than US.
Hello professor, i have doubt here when we subtract the default spread from $ bond rate of any country then wouldn’t the bond rate be equal to US DOLLAR bond rate which means it has the same risk free rate as that of US .
I may be wrong, but I think the correct thing would be to convert that rate that is in dollars to the currency in which you want to calculate the rate, since I have heard the professor say that you cannot add rates in different currencies, for which I assume that subtracting or adding this rate in dollars with another currency would be a mistake.
I have bought Aswath book “Investment Valuation” and it really goes hand in hand with watching these lectures, really appreciated!
Thank you very much, this - just as the previous three sessions in this class - was excellent
Class starts at 1:30
Also Prof, consider changing the thumbnail. Right now it's the "no camera" thumbnail
sir appreciate the teaching
Thank you very much for the classes. Why is the intrinsic risk-free rate (cost of debt for the government) equal to growth + inflation?
Because that is the rate a default free government should be paying on its bonds. If a government has 100 income, with growth of 4 % and inflation of 10%, it will have 114 next year. So it can pay back 14% (4+10)
makes sense, thank you for the response!@@utsavsinha5157
Sir please give your valuation on carvana company.....hot content..🙏
With all due respect, I believe that following what you teach, by subtracting the bonds in dollars from country X with the US bond rate, we obtain a rate in dollars, if we subtract that rate from the bond rate of country X and those bonds are in the currency of country X, we would be mixing rates in dollars and rates in the currency of country X, which I think could be a mistake, we should not pass the rate (difference between bonds that are in dollars) to the country's currency X through inflation (do I discount that of the USA and add the inflation of country X with the formula that you teach?)
Hi, thanks for all the great educational posts and materials. I also wanted to let you know that the post class test and the test solution is generation a not found page. Thanks
Try now, and if it still does not work, try a different browser.
@@AswathDamodaranonValuation Thank you kindly.
@@AswathDamodaranonValuation Heyy! Professor, I have a query.
Right now India is have lower inflation than US, so why Indian Risk free rate is higher than US.
@@vinnijaat because India still has some loans
Because that is temporary and real growth in India is still higher than in USA@@vinnijaat
Is this playlist helpful for FRM exam??
Hello professor, i have doubt here when we subtract the default spread from $ bond rate of any country then wouldn’t the bond rate be equal to US DOLLAR bond rate which means it has the same risk free rate as that of US .
I may be wrong, but I think the correct thing would be to convert that rate that is in dollars to the currency in which you want to calculate the rate, since I have heard the professor say that you cannot add rates in different currencies, for which I assume that subtracting or adding this rate in dollars with another currency would be a mistake.
no, because even triple A countries can have different bond yields