As far as I understand it, a billionaire’s wealth is wrapped up in stock, which is used as collateral to borrow money to actually spend. So how do they pay off those loans? With other loans? Loans all the way down?
In: Economics
They sell strategically, when their stock has run up significantly, or when there’s a change in tax law that lowers capital gains taxes, etc. Or just keep rolling over loans and let their estate sort it out upon their death.
But imagine some billionaire borrows $1b for 10 years at 2% APR while their stock doubles in value during that time. Even if they sell enough to cover the loan, interest, and taxes, they are still way ahead.
Latest Answers