Insolvency is very expensive! You can map it into the framework outlined in the post by assigning insolvency some interest cost of x% where x% >> 4%. If you don’t like assigning a made up interest cost to being insolvent you can instead think of the whole thing in terms of a higher order representation such as utility. It then follows that you should cover your insolvency before covering most debts.
Insolvency is very expensive! You can map it into the framework outlined in the post by assigning insolvency some interest cost of x% where x% >> 4%. If you don’t like assigning a made up interest cost to being insolvent you can instead think of the whole thing in terms of a higher order representation such as utility. It then follows that you should cover your insolvency before covering most debts.