Foundations of Finance

01Defining Finance and the Financial System 02Valuation and Management: The Two Challenges 03Stocks, Flows, and the Five Cash-Flow Decisions 04Time, Risk, and the Six Principles of Finance 05How to Learn Finance: Practice and Study Habits Problem set0/10 Problem set 20/10 Practice∞

Present Value

01Information and Price: An Auction and Fannie Mae 02Who Pays for the Fannie and Freddie Guarantee?03What Counts as an Asset: Patents, Secrets, Brands 04An Asset as a Sequence of Dated Cashflows 05The Value Operator and the Cashflow Timeline 06Dates as Currencies: Building Net Present Value 07Discount Factors: Market Prices for Future Dollars 08A Worked Net Present Value and Its Assumptions 09The Opportunity Cost of Capital and Present Value Problem set0/10 Problem set 20/10 MIT problem set0/5 Practice∞

01Does the Currency Change an NPV's Sign?02Moral Hazard and Contagion: Where Bailouts Stop 03The NPV Rule at Work, and Choosing the Rate 04The Perpetuity: Why Cash Forever Is Worth C/r 05Reading the Rate Off a Perpetuity's Price 06The Growing Perpetuity, and When Growth Outruns r 07Building the Annuity from Two Perpetuities 08The Annuity Discount Factor and Mortgage Payments 09APR, the Effective Annual Rate, and Compounding Problem set0/10 Problem set 20/10 MIT problem set0/13 Practice∞

Who Pays for the Fannie and Freddie Guarantee?

If a government guarantee costs nothing up front, who pays for it, and why did shareholders lose while counterparties were made whole?

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Your summary note

1. The guarantee's scope and its cost across generations
  Record which paper the guarantee covered, state that the money backing it cannot be spent on anything else, and name the generations of taxpayers who might ultimately carry the cost.
2. A government-sponsored entity versus a federal agency
  List the private-company features a GSE had, state its government-dictated mandate with profit secondary, and record the quasi-private, too-big-to-fail status that combination produced.
3. Weighing the housing boom's costs against its benefits
  Record the subprime borrower who made every payment as the benefit side, set it against the paper-holders' losses, and state that the weighing needs a valuation framework.
4. Shareholders versus counterparties: opposite outcomes
  Identify who held the shares, including through 401(k) plans, and who held the issued paper, and record what each group was left with after the takeover.
Attempt 1 of 2