Is it possible?

Question

Is it really possible that a company promise 3 times the amount you invest? The company appears trustworthy. They are offering this offer to the general pulbic for funding. You invest 10k and get back at least 1k every month for 30mths.
Possible???

Answer 1

They can promise all they want but that doesn’t make it risk-less investing. Since they require capital, there is a certain cost, the cost of capital (or interest rate), that the firm must pay in order to acquire funding for a project. Here are some generalized examples:
Risk-free investing/Treasury Notes (4.46%), Certificates of Deposit (extreme low risk if all S&Ls fail and FDIC can’t cover the deposit – 5%), Highly rated Company Bond (firm has low risk because of high probability it will make its coupon payments due to solid cash flows - 6.25%), Low Beta Stock (Utility Company – regulated industry that provides bond like dividends plus capital appreciation – 6-7%), High Yield or Junk Bond (8%+, GMs/Fords/etc – uncertain cash flows to the firm result in uncertain coupon payments to bond holders), S&P500 (Long-run market return – 14%), High Beta Stock (Tech stocks – 20%+ return). Unfortunately, the required rates of return shown above only tell one side of the story. Although the S&P 500 may have a long-run return of 14%, the standard deviation is 19%. So with 96% certainty in any given year, the returns on the market could be anywhere from -24% to 52%.

For the transaction you are discussing, the required rate of return is ludicrously high (depending on the time frame). Think about how much money the firm would have to make (with a high degree of certainty) in order to fulfill all of its obligations. If the firm could predict that level of cash flows, then the return it would provide would be significantly lower (because it’s cheaper for them and provides them with more profit). Bottom line, just because a company issues a high yield bond with a written obligation to pay, if they go bankrupt, you get nothing.

Answer 2

Is it possible? But of course. It is possible that I could promise you the moon and appear to do so with the greatest sincerity.

But I can't deliver.

They may promise. They may deliver. But they will use you as an example to gain the same from others, with which they pay you. The chain goes on until either they run out of people to enlist to pay those in line before them, OR they skip out with the bulk of the cash received and leave you and a long list of other "investors" wondering what happened.

If it sounds too good to be true--it usually is.

Answer 3

You may get what they promised for the first moths,,,,But later..

Answer 4

Anything is possible. Now is it true is a whole different story.

Coach