How the hell does anyone answer this question? I was asked twice and simply just couldn't go around it. Too many variables that need to be explained first!
When interviewers ask this question, what answers are they looking for exactly?
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Hi Grammy, lets say your bank is paying you $3 every year, but I offer to start paying you $4 every year instead. So, the longer you're locked into the $3 agreement, the shittier the deal with the bank is. If you're stuck with the $3 payment for 15 years, the value of that deal will drop a lot when the $400 payment option is available. If you're only locked in for 1 year, it's not a big deal
Nice job!
I got this question a lot too! How i answered it is similar to the one above, i would always say something like "it's how fast you recover your money" - because in a way we are looking at weighted cash flows that are sensitive to interest rates.
Qui ratione veritatis est sit earum similique. Aut sed similique ex et facere impedit. Excepturi et ut molestiae et fugit.
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