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Strategies & Market Trends : Value Investing
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To: armi who wrote (40798)12/27/2010 12:36:24 AM
From: Jurgis Bekepuris  Read Replies (1) of 78717
 
It says interest rate and not desired return or whatnot. What do you think is an appropriate interest rate?

Although it says interest rate and not desired return, the meaning of it is still a return that you could get at that time on that dollar amount. In essence you are calculating a dollar amount that would return the same amount of money over person's as the earning differential between educated and uneducated earnings. But what is the return rate?

If you go with interest (risk free?), you'd probably take a long bond rate, since you are discounting for a person's lifetime and 30 year bond is pretty much what you can get kinda guaranteed for long term. Buffett is (intentionally?) simplifying a lot here, since obviously there is no (risk free) single rate that you could use for the whole person's lifetime.
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