Fin 4319-Lecture 5 Flashcards

1
Q

What is debt consolidation?

A

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

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2
Q

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

A

Interest rates would go up.

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3
Q

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

A

It maybe their policy

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4
Q

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

A

Unfunded liabilities, Social Security, Medicare and Medicare prescriptions

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5
Q

Why we don’t have savings in US?

A

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

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6
Q

How do we fix it?

A

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

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7
Q

Why were households DSU?

A

In 2008, 2009 the loans defaulted

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8
Q

Who is the biggest DSU now?

A

Federal Government

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9
Q

Can your debt be passed to your children?

A

Not in US

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10
Q

Can federal debt pass to the next generation?

A

Yes.

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11
Q

Was it a shift in our savings?

A

.

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12
Q

What is discount basis?

A

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

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13
Q

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

A

Treasury Bonds

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14
Q

What kind of yield is listed on the Federal Reserve?

A

Yields to Maturity

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15
Q

What is BDR?

A

Bank Discount Rate (360 day year)

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16
Q

What is APR?

A

Annual Percent Rate

17
Q

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

A

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

18
Q

What is the BEY for Commercial paper?

A

Get the BEY for the quote

19
Q

What is a negotiable CD?

A

They sell on the secondary market

20
Q

What are money market business?

A

Fed Funds, Negotiable CD, Repos

21
Q

What is RV?

A

Redemption Value

22
Q

What is a balloon loan?

A

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

23
Q

What is the amortized loans?

A

The principal and interest is paid at the same time

24
Q

What are Bond indenture?

A

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