Quote from: Sukrim on May 22, 2012, 09:57:26 PM

Quote from: MrTeal on May 22, 2012, 04:38:25 PM

Scenario:
The shares sell for 2BTC each. I have 200 BTC, and purchase 100 shares. The first week I receive 6.5BTC dividend, a 3.75% return on my 200BTC. The second week, I get a 6.5BTC dividend, again a 3.75% return on my 200BTC investment. The numbers don't converge, I'll always be receiving a 6.5BTC return on my 200BTC investment.

In the end it depends on your reinvestment strategy. As shares will _always_ be available at ~1.02 (I still would prefer 1.01 by the way, I don't really see where 2% fees come into play!) you can buy 6 additional shares from the first dividend, 6 more shares from the 2nd dividend etc.

If you buy 100 shares for 102 BTC, after 1 single dividend all you need to do is to buy the remaining 2 shares and donate the rest to charity/GLBSE/... and act as if you started 1 week later.

That still doesn't change the fact that the rate of return is constant. Let's for a moment assume you can buy fractions of a share, to make the numbers easier. If you followed the strategy you propose of buying more bonds with the dividends, this is what you'd see. Numbers were rounded for ease of reading but full precision was kept. Purchase price was assumed to be 1.02, so the initial investment was 102BTC.

Code:

Week Shares Dividend at end of week
0 100.00 6.50
1 106.37 6.91
2 113.15 7.35
3 120.36 7.82
4 128.03 8.32
5 136.19 8.85
6 144.87 9.42
7 154.10 10.02
8 163.92 10.65
9 174.37 11.33
10 185.48 12.06
11 197.30 12.82
12 209.87 13.64
13 223.25 14.51
14 237.47 15.44
15 252.61 16.42
16 268.70 17.47
17 285.83 18.58
18 304.04 19.76
19 323.42 21.02
20 344.03 22.36

At the end of the 20 weeks, you have 344.03 shares and are earning 22.36 BTC per week. If you had a Pirate account that earned 6.5% interest and reinvested the proceeds, after 20 months the same 102BTC initial investment would produce 359.41BTC. It never converges toward being equal to 6.5% interest.

If you reinvested everything into shares at 1.02, at the end of the year you'd have 2483.9 shares and be getting 161.45BTC dividends. If you sold those shares at 1.02, you'd have 2533.6BTC. Compare that to just investing in an account that pays 6.5% weekly interest you'd have 2643 in the bank.

Don't get me wrong, I bought some of these and I like the idea, I just don't want people to get the wrong idea

Quote from: Raphy on May 22, 2012, 03:29:55 PM

So what would the new interest rate be? If you sell your bond at 1.02 without changing the dividend, that means about 4,41% per week...

Quote from: Chaang Noi (Goat) ช้างน้อย on May 22, 2012, 04:30:09 PM

the first week will be lower, but after that it will be 6.5% if you do the math, the furth you go out in time the closer you get to 6.5%

It's not like your effective dividends will converge to 6.5% over time. If you buy 100@1.02, you earn 6.5BTC the first week which is a 6.37% return, and that doesn't change. It's not like it will start out lower and over time approach 6.5%.