I am really enjoying your videos, you have a very engaging style that makes it easy to stay focussed and learn. Could you possibly make a video sometime on market makers and the mechanics of how they actually work? thanks for all the content :-)
it all depends on the interest rates of the bonds, and the potential gains of the "risk" for example given the 100,000 with a 60-40 split, the buyer/investor should be given a % potential gain for the product, something like "with the possibility of a 12% annual return for the lifetime of the product. so 100,000 on lets say 5 years and a potential of 12% annual gains; with 60,000 put into a 5 year bond, at say 3% interest, then the remaining 40,000 would be put into a "riskier asset" that has a high likelihood of a high enough return to cover the difference, and if "everything goes well" you should get back 176,000 after 5 years, and this might be before or after "management costs/fees" (the seller will take the remainder of the gains) this "should" have a much higher likelihood of returning more then the initial investment, but has a much greater likelihood of at least returning the initial investment, and that is what the insurance is. though I would hope that the buyer is at least informed what the "risky asset" is before investing.
