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Rob's s1452 Notes

πŸ™‹ Section/Student Qs for Lecture 8

Agenda for Saturday Section, July 27 βœ…

  • Slide Review, concentrating on the most important and challenging slides from this week’s lecture.
  • Pages about this lecture on this website. Read 🧭 Getting Oriented for how to find them on the site.
  • Solutions for Problem Set 3, Questions 2, 4, 11, and 16.
    • We began reviewing solutions at approximately 5:11 pm. You can use the clock on my screen for reference. More info here.
  • Solutions for Problem Set 4, Questions 2, 6, 7, 9, and 13.
    • We began reviewing solutions at approximately 5:17. You can use the clock on my screen for reference. More info here.
  • Office Hours. Click here for notes and timestamps. Email office hour questions to robecon1452@gmail.com and I will cover them next section.

Click here to learn about timestamps and my process for answering questions.

πŸ“… Questions covered Saturday Section, July 27

Today, we will go over a number of responses to the feedback form at the bottom of every page on my website.

I’ve also added some new functionality, where you can see your question submitted. More importantly, when I cover the question, I’ll add a link to the page where I covered it. That way, you can find the relevant page on the website. From there, you can find the section recording. Here is the link: https://robmunger.com/responses.txt

Please note that for any urgent question, I’ll be able to give a faster response if you just email me the question at robecon1452@gmail.com. The feedback form is meant for feedback about the website, but I’m also happy to use it to answer student questions. It might just take a little longer!!

Slide 36 of L7

πŸ•£ 6:26ish pm ❔ Can you review slide 36 from Monday’s lecture?

βœ” in video

πŸ•£
❔ How are losses treated with bonds?

βœ” We covered the relevant homework problem in the recording and gave a complete solution. There is also a page on this site called somethign like Taxes with Discount bonds

πŸ•£
❔ The graph with the IORB (ample reserves)

βœ” Covered this earlier

πŸ•£ 6:30
❔ Bond Dealer’s Bank Balance Sheet: why is there Liabilities: deposits increase by 100k

βœ” When the Fed sells a bond to the bond dealer, the bond dealer must pay. It pays using its deposits at the bond dealer’s bank. In using the deposits, the amount of deposits at the bank decreases.

πŸ•£ 6:31
❔ why Money Multiplier Process or Resource Multiplier Process: reserves in the banking system increase.

βœ” During video, we covered how the fed creates new reserves.

πŸ•£
❔ Inverse relationship between yields and price?

βœ” Covered in video.

πŸ•£
❔ Are you going to cover the Term Structure of Interest Rates from Lecture 7? If you already did I must of missed.

βœ” We did close to the end of the last section recording.

πŸ•£
❔ Second problem here: http://localhost:4321/l7/durationpractice

βœ” Covered this in video.

πŸ•£
❔ What causes reserves in the banking system to increase?

βœ” Covered in video

πŸ•£
❔ Message: Have you posted the solutions video on Canvas yet?
Page URL: https://1452.robmunger.com/l5o/solutionsps3/

βœ”

πŸ•£
❔ Message: Hey Rob, link for the spreadsheet is not working.
Page URL: https://1452.robmunger.com/l6/bondsspreadsheet/

βœ”

πŸ•£
❔ Message: Sorry, something went wrong
Our server is having a problem. We’re working to fix it as soon as we can, so try again in a few minutes.
Page URL: https://1452.robmunger.com/l6/bondsspreadsheet/

βœ”

πŸ•£
❔ Message: What’s the difference between yield to maturity and asked yield to coupon maturity?
Page URL: https://1452.robmunger.com/l6/section6/

βœ”Don’t worry about that.

πŸ•£
❔ Message: The RATE() formula requires nper, pmt, pv, [fv], [type], [guess].
What’s β€˜type’ and β€˜guess’?
Page URL: https://1452.robmunger.com/l6/bondsspreadsheet/

βœ” You can ignore type and guess.

πŸ•£
❔ Message: type II: find r_m
”Note: π‘Ÿ_π‘š here is essentially the β€œafter tax” rate.” What does this mean?
Page URL: https://1452.robmunger.com/l6/taxexemptbondex/

βœ”

πŸ•£
❔ Message: Why do people in the higher tax bracket prefer muni?
Page URL: https://1452.robmunger.com/l6/taxexemptbondex/

βœ” Because interest income is taxed at the regular tax rate (ie the rate of your tax bracket), people in higher tax brackets pay higher rates on income from bonds. Therefore, they will prefer the tax advantages of munis.

πŸ•£
❔ Message: How to calculate before-tax holding-period return?
Page URL: https://1452.robmunger.com/l6/section6/

βœ”

πŸ•£
❔ Message: When calculating the bond price using the short cut; if the bond pays once per year % , r value is it full interest or half as was presented in the slides?
Page URL: https://1452.robmunger.com/l6/section6/

βœ”

πŸ•£
❔ Message: Can we have Pre-tax and after tax examples? Holding period examples?
Page URL: https://1452.robmunger.com/l6/section6/

βœ”