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∞

01Leverage: How a 10% Fall Becomes a 200% Loss 02Who Absorbs the Loss: Walking Away, Rate Cuts, Bailouts 03Last in Line: Chapter 11 and How Lehman's Equity Hit Zero 04Inflation vs. Time Value: Wealth and the Price Index 05Real Returns: Match the Discount Rate to the Cashflow Problem set0/10 Problem set 20/10 MIT problem set0/7 Practice∞

Who Absorbs the Loss: Walking Away, Rate Cuts, Bailouts

Once the equity is gone, who actually eats the loss — the borrower, the lender, or everyone holding dollars?

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Your summary note

1. Marking to market and the adjustable-rate reset
  Define marking to market against a carried book value, cite the sealed-box auction at $45, and record when the mark stops mattering and when the $300-to-$1,000 reset makes it decisive.
2. Non-recourse mortgages and handing back the keys
  Write down what a non-recourse loan leaves the bank as its only remedy, set out the case for walking away from a house with no equity, and state how long the credit damage lasts.
3. Rate cuts, inflation, and the indirect subsidy
  Record what a rate cut does to defaults and what it costs in inflation, cite the 18.63% peak of October 1981 against 6.95% today, and state the equilibrium subsidy argument.
4. Taxpayer exposure and the Lehman weekend
  Name the three firms that actually put taxpayers on the hook, then set out that weekend's sequence from the Fed's refusal through Barclays to the Chapter 11 filing.
Attempt 1 of 2