Fin 4319-Lecture 5 Flashcards Preview

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Flashcards in Fin 4319-Lecture 5 Deck (24):
1

What is debt consolidation?

When you take a home equity loan to pay off your credit card debt

2

What would happen if the rest of the world stopped loaning the US money?

Interest rates would go up.

3

Why is the rest of the world still lending the US money?

It maybe their policy

4

What is great than then the debt to the rest of the world?

Unfunded liabilities, Social Security, Medicare and Medicare prescriptions

5

Why we don't have savings in US?

Our domestic investments (capital expenditures, consumer durables) exceeds savings

6

How do we fix it?

Use savings to invest instead of financing/borrowing for consumer durables

7

Why were households DSU?

In 2008, 2009 the loans defaulted

8

Who is the biggest DSU now?

Federal Government

9

Can your debt be passed to your children?

Not in US

10

Can federal debt pass to the next generation?

Yes.

11

Was it a shift in our savings?

.

12

What is discount basis?

Don't compare this directly security to others. Convert to bond equivalents.

13

Which Treasury should you buy if you think there's no inflation?

Treasury Bonds

14

What kind of yield is listed on the Federal Reserve?

Yields to Maturity

15

What is BDR?

Bank Discount Rate (360 day year)

16

What is APR?

Annual Percent Rate

17

What price would investor have to pay for this Treasury Bill?

Use BDR, use the Ask, In decimal form, see notes

18

What is the BEY for Commercial paper?

Get the BEY for the quote

19

What is a negotiable CD?

They sell on the secondary market

20

What are money market business?

Fed Funds, Negotiable CD, Repos

21

What is RV?

Redemption Value

22

What is a balloon loan?

The principal is paid at the end of the life of loan

23

What is the amortized loans?

The principal and interest is paid at the same time

24

What are Bond indenture?

the contract bond holder and issuer about everything related to the contract