Fin 4319-Lecture 5 Flashcards
What is debt consolidation?
When you take a home equity loan to pay off your credit card debt
What would happen if the rest of the world stopped loaning the US money?
Interest rates would go up.
Why is the rest of the world still lending the US money?
It maybe their policy
What is great than then the debt to the rest of the world?
Unfunded liabilities, Social Security, Medicare and Medicare prescriptions
Why we don’t have savings in US?
Our domestic investments (capital expenditures, consumer durables) exceeds savings
How do we fix it?
Use savings to invest instead of financing/borrowing for consumer durables
Why were households DSU?
In 2008, 2009 the loans defaulted
Who is the biggest DSU now?
Federal Government
Can your debt be passed to your children?
Not in US
Can federal debt pass to the next generation?
Yes.
Was it a shift in our savings?
.
What is discount basis?
Don’t compare this directly security to others. Convert to bond equivalents.
Which Treasury should you buy if you think there’s no inflation?
Treasury Bonds
What kind of yield is listed on the Federal Reserve?
Yields to Maturity
What is BDR?
Bank Discount Rate (360 day year)
