risk-free interest rate

Now let me offer you my simple proxy, the rule that I use to cap my growth rate.

I use the risk-free rate in my own valuation as a cap for the growth rate.

And more than any other piece of what I do in valuation, this is the one that people take issue with.

My argument for using the risk-free rate is simple.

It takes into account the currency

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The interest rate is the value that you're getting for just putting the money away for that period of time.

When the risk-free rate goes up, you could do nothing and earn a higher rate of return over an extended period of time.

You're getting 5.5% closer for a 10-year period, if you like.

The returns you need in order to justify investing in an asset that has some risk attached to it is higher.

They don't have enough tax revenue, so they go and get money to go fund their deficits.

When they go and do so, somebody goes and gives them money and buys a bond in return and earns an interest rate for the purchase of the government bond, which we typically classify as like the safest investment in the world.

Or like US treasury bills are like the risk-free rate.

So the chance of you not getting your money back from the US government or from a AAA government is near zero.