Ses 4: Present Value Relations III & Fixed-Income Securities I

MIT 15.401 Finance Theory I, Fall 2008
View the complete course: ocw.mit.edu/15-401F08
Instructor: Andrew Lo
License: Creative Commons BY-NC-SA
More information at ocw.mit.edu/terms
More courses at ocw.mit.edu

[@MrSpringooo]

Andrew Lo is the best lecturer ever along side jonathan Gruber! I can't thank MIT enough for uploading These courses!!

[@RaylinRecords]

Watching Microeconomics now and couldn't agree more!

[@firsttrademarkets7511]

We are currently teaching individuals and companies how to trade stocks, forex and crypto currency. Watch our video to get started.

[@qudizzle1]

What happened to Mr Jonathan Gruber, heard he got fired

[@Mlbbeatthestreak12]

It’s amazing to watch these lectures as they are happening right in the midst of the financial crisis in late 2008

[@blimblambo4968]

Im watching these in the new crisis, yey.

[@kushalsaitia971]

I know that it is tempting to skip the Q&A discussion part of the lecture or simply skim through it, but the fact that this course happens while the financial crisis was unfolding, gives you great perspective about then realities and how the stuff being taught at the lecture or the one before it relates to the same. This coupled with hindsight perspective of what happened will really give you an innate understanding of financial crisis while you're doing an introductory course to finance.

[@himjanand2034]

hello, if u r still studying still course, would u like to work with me through this course?

[@gabriel.casanas]

nah

[@Theferg1]

@@himjanand2034 Hey I’m starting to go though this course if you would like to go though it together let me know ASAP?? Thanks

[@himjanand2034]

@@Theferg1 yes, we can do it together Can u email me at [e-mail]

[@kalubhandari6607]

बनझाकृि

[@jas0609]

Present value is the bedrock of finance. In order to calculate the value of any asset (stocks, bonds, corporations...), you need to master present value.

[@michaelluke1618]

Andrew's lectures are addictive! Totally awesome!

[@ViktorMyronov]

Michael Luke q

[@akashbavishi6615]

Yes i started yesterday ,want to see all as soon as possible

[@firsttrademarkets7511]

You’re right but we have the best strategy to make consistent profits.

[@RamtejBolisetty]

It would be great if you can also upload his pro-seminar lecture where he speaks in depth of subprime mortgage crisis

[@seandelargy5639]

+ 1

[@chiefawilkerson]

Agreed how do we find this

[@matthewrice7590]

these lectures are amazing and timeless, can't believe a graduate level course taught by Andrew Lo has been made available for free online. Although I do wonder how someone like him could use the the Greek symbol for p (π), especially in the context of an equation, and not expect people to assume it's actually referring to Pi 😅glad a student asked about it because I was also thinking "interesting, how does a circle play into this?.." 😂

[@MathematicsStudent]

Mathematicians use the Greek letter pi refer to many, many different things that have nothing to do with circles! It very much depends on the context.

[@Emily-fm7pt]

@@MathematicsStudent Number theory moment

[@paulsamuelson98]

Andrew Lo is great if you read brealy, allen and meyers along with this you'll ace any intro finance class no problem! Thank you Andrew!

[@theasz3012]

Is it available on Amazon?

[@elvislai4878]

fixed incomes security lesson starts at about <a href="#" class="seekto" data-time="2700">45:00</a>

[@lincha3216]

+Dickie Lai thx!

[@TheASSASSIN51]

the real mvp

[@marcoi9399]

Thx!!

[@VNH05]

Thank you 🙏

[@Kgp-ty5dk]

please don't skip. The initial discussion is Gold.

[@datastory4]

Because of this professor I start believing the importance of financial. Wonderful person. Thanks a lot professor. Hope one day I will be your place and teaching others about finance may be not in MIT. Thanks once again.

[@robpatty1811]

Rewatching these after 5 years, originally watched the series when I was studying for my IMC. fantastic lecture series.

[@zanli959]

This is so good. I am addicted to it.

[@chayanitwanwanich7576]

Lecture starts at <a href="#" class="seekto" data-time="1832">30:32</a> !

[@01hZ]

fed did cut rates to below 1%

[@AlvinGuoSubscribe]

Nowadays they're negative!

[@StephenOzor-sl8eq]

Thanks, Andrew lo insight on financial engineering is aww inspiring. Love from Nigeria 🇳🇬.

[@antoinetteprince]

Thank you so much for these amazing lectures ! I’m addicted ! Please come to EPFL :)

[@gayansapuge4008]

Fixed income securities start at <a href="#" class="seekto" data-time="2555">42:35</a>

[@hope-mg5sr]

Thank Internet to give me an opportunity of joining such a inspiring lecuture!

[@anudeep_tondothi]

May god bless Andrew w lo and his family with health & peace....

[@SmartInvestor]

thank you so much!! great lessons!!

[@mishrashubham007]

lecture starts at <a href="#" class="seekto" data-time="1800">30:00</a>

[@Wilhelm8e]

This series of lectures are invaluable. Thanks for sharing them.

[@arv_sajeev]

Andrew lo is great, and the questions students ask are great as well :)

[@marcoslopez2132]

damn, this is really amazing material!

[@arkoraa]

Love it! Thank you

[@angelbaby.7897]

Amazing lecture super fun, loved the tips, thanks prof! (:

[@av5957]

Lecture starts at <a href="#" class="seekto" data-time="1828">30:28</a>

[@firsttrademarkets7511]

check us out kzbin.info/www/bejne/enO6Z6R6jdd5o9k

[@jemalguillory]

I live in Stockton, CA. Buyer's market for 5 years!

[@navaneethakrishnan8056]

How ironic - if you are in the capital markets today (2020 March), 2007 might seem nothing! Great lecture nevertheless

[@sleyeborgrobot6843]

doomer wojak was born in the darkness

[@greatwhite44u69]

This is fascinating stuff... I am a IT guy not finance, but the speaker is easy to follow.

[@quinnlevy8996]

What edition of the book are we supposed to be reading? The OCW says 9th edition but chapter 23 at least (he says to read 23-25) has absolutely nothing to do with what he's talking about as far as I can tell

[@vladlenvronsky8414]

Still very timely today in 2021

[@quinnlevy8996]

down from 2 million on the first video to a range of 400k-500k now. Those of us still here are in it for the long haul

[@abd-alrahmanghaly3839]

This is gold!

[@qiansu2001]

Does MIT has a course on Project/Infrastructure financing? Very curious and eager to watch that.

[@mitocw]

Try our course finder, hopeful this will help you find the materials you are looking for: ocw.mit.edu/courses/find-by-topic/#cat=business&subcat=finance

[@qiansu2001]

Thank you very much, I have already find the course materials of Finance Theory 2. Unfortunately there are no video lectures ; (

[@seandelargy5639]

@@mitocw Hello, could you please consider uploading his pro-seminar on the subprime mortgage crisis. I know there is a lot of interest in this from other comments. Thanks

[@aadityasinghal1092]

Do the fed really cut the interest rate ???

[@kamalarora6651]

Thanks thanks thanks

[@jackieenglish9204]

I wonder where all these students are now...

[@sophieelku9930]

loved it

[@wakasakazickc3363]

cool lecture， i love it

[@akashbavishi6615]

Actually large institute can look glossy but they can be highly and financially weak from inside ,that is what i confirm after initial discussion

[@firsttrademarkets7511]

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[@dillanjere2428]

@6.10 (time stamp) Pease may someone explain: What is the value of my asset when I put down $100 000 on a US$500 000 Mortgage? $500 000 or $100 000?

[@nbdh7619]

Charming. Thanks.

[@TheDivss]

Thank god someone asked what is pi here haha being a scientist this was really disturbing me whilst understanding the equation!! Haha i was like what how it is equal to pi?? Thanks prof for ur lectures 🙏🏻🙏🏻☺️☺️

[@firsttrademarkets7511]

check us out kzbin.info/www/bejne/enO6Z6R6jdd5o9k

[@user-ik4fb3jw2x]

Does anybody know where is the ”Wednesday lecture” he mentions in the beginning and whether it has been uploaded?

[@mitocw]

Playlist: kzbin.info/aero/PLUl4u3cNGP63B2lDhyKOsImI7FjCf6eDW Course materials: ocw.mit.edu/15-401F08 Best wishes on your studies!

[@netizenkane2230]

Brilliant.

[@manoj0100]

<a href="#" class="seekto" data-time="2555">42:35</a> FIXED INCOME SECURITIES

[@timbotech6683]

Time value is indeed the concept that people prefer money now to money later; but inflation is related to that desire as most people prefer to spend now than later due to the fact that inflation will destroy the value of their dollar in the future. Inflation is the cause of people wanting to spend now than later.

[@allthingsconsdrble]

<a href="#" class="seekto" data-time="1289">21:29</a> - “Trumped” Prof Lo a sage 🧙🏽‍♂️

[@riteshpatidar9184]

I am making notes if these lectures simultaneously... thanks

[@himjanand2034]

hey, would u like to work with me through this course

[@riteshpatidar9184]

@@himjanand2034 how?

[@supersaiyan90001]

@@himjanand2034 hey are you still working through these courses? Can you set up a chat group to discuss finance topics

[@himjanand2034]

@@supersaiyan90001 hey, i suck at this stuff, instead can u create a group chat n share link to me

[@prabhatdixit9894]

@@himjanand2034 completed this course yet??

[@cia9288]

That is T-pain sitting in the first row on the left.

[@phildurre9492]

i guess i skip the part for fixed incomes, we have fixed loss only in 2021 no fixed income

[@MurDocu]

Hi, can someone help me in knowing which edition of brealy myres was used here?

[@mitocw]

The 9th edition was used. For more info and course materials visit MIT OpenCourseWare at: ocw.mit.edu/15-401F08. Best wishes on your studies!

[@alecouto]

Thank You

[@simonroese2596]

20 minutes mark is starting to sound familiar to current economics

[@madridmusic3948]

<a href="#" class="seekto" data-time="2715">45:15</a>

[@fabiotrucco7969]

The professor is so immerse in finance didnt remember π is widely used in geometry and algebra

[@britishfan6138]

LTC will play a big part in the Metaverse after update?? Is this rumour right

[@kegomania]

If the market establishes rates how can the fed cut them?

[@kegomania]

It seems as if the fed would not have control over what people are willing to pay

[@julion89]

Half the equity is wiped out, not the asset <a href="#" class="seekto" data-time="368">6:08</a>

[@irszgatti]

<a href="#" class="seekto" data-time="1920">32:00</a> is just halarious.

[@stephenss9859]

Hi thnx for the tutorial. i m business student preparing cash budget i m very much confused how to include opening bank overdraft and opening trade receivables i mean which category income or loan or opening balance.or these are 1st month income r opening balance.? plz help me with both opening overdraft and trade receivables how to add ? Thnx in advance.

[@niharranjanbiswas3812]

suitable

[@GateHacker1]

Killed it

[@jdawg443]

What a cliffhanger! I wonder if the fed will cut rates 🤔

[@quinnlevy8996]

Okay, idk what other universities he's taught at but who on earth sees the pi symbol and doesn't assume 3.14...?

[@joseleon8235]

The fiat dollar on 2024 reminds me of Lehman! 2008. Greedy!

[@anara5570]

2021 👍❤

[@andrewb1993]

2020

[@thefroger9121]

You can’t stop what coming

[@robert23497]

If the coupon bond interest rate is 5% and the discount bond interest rate is also 5%, why would anyone buy the discount bond? The discount only pays off at the end of the term. If the guy/company/government dies before the maturity date, then I lost my principle AND my interest. That's an 1150 dollar loss in his example. If I bought the coupon instead and the guy/company/government dies, then at least I got an interest payment or two....bringing my total loss down to 1100 or maybe 1050. What I'm saying is.....the only way I would buy the discount bond is if my return on investment was going to be greater than my return on the coupon bond. Am I missing something here?

[@blakebruner5038]

The coupon bond will have a higher market price, because those extra coupon payments are going to be factored into the net present value. So if the market were perfectly efficient, you couldn't make extra profit from buying the coupon bond, because it was worth more in the beginning. And the additional amount that you would pay for it at time t=0 would be exactly the same as the extra interest associated with it over the lifetime of the bond.

[@firsttrademarkets7511]

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[@tobiasgorny8974]

Min 34 “and Thats a lot cheaper than when oil was at 40$ a barrel”

[@ShadGotEm]

<a href="#" class="seekto" data-time="757">12:37</a>

[@ibraheemmoosa]

Wow. That's an old windows system.

[@darkferiousity]

What if the chicken hatches when the egg breaks?

[@chrischoir3594]

this guy in the striped shirt looking at his phone as he probably gets to go to MIT for free

[@arrowb3408]

Hahaha ... I spot a handful of "recycled" "full- fledged" big men sitting in the classroom. I can imagine myself like them with much age facial feature but pay much attentions than them. Because life is far too short and I can't be playful as I was on the sanctuary lecture like before. It is still fun to sit in Andrew's lecture.......STF...

[@arrowb3408]

Aha, knew the Black Friday, but the total phenomenon in real financial world is beyond my limited knowledge. Now I got it all. Frankly speaking, it was horrific and would be if this financial tsunami happens again in 21 century over again. Then I will in deep s-h-i-t.................................STF..................................................

[@dbsk06]

<a href="#" class="seekto" data-time="1852">30:52</a> when lecture starts

[@himjanand2034]

,hey, would u like to work with me through this course

[@arrowb3408]

This is so true for a stock $ 62 and becomed zero in few months. Wow...it would be the worst nightmare in anyone's life......continue watch the Video........STF......

[@thinkpod4543]

it’s April 2022

[@IamPaste]

"We get all excited when Google tries to takeover Yahoo!" Haha.

[@matthewmcgee6874]

Shawty got Lo Lo Lo Lo Lo Lo Lo Lo

[@gold_apple_vn4657]

Bank, physic, atoms, trade off: 3 present decrease every year

[@gold_apple_vn4657]

House price to care about, everything is cash flow,

[@gold_apple_vn4657]

Look at government bonds and coupon to predict the future interest rate

[@kbarrett63]

interest rates are inflationary by nature..imo

[@CJinsoo]

why wasn’t it nuts? speculate on higher prices, and/or uncle sucker subsidizes your losses, so you can transfer your risks to other folks.

[@injectorplanet4306]

deflation is a measure of how much progress was made.

[@kozlowsiki2000]

brain damage......he is very fun

[@vladlenvronsky8414]

Crazy now how Bonds can be put on the Blockchain now. I feel like this is now a solution moving forward.

[@firsttrademarkets7511]

Yes is a good solution. We are now teaching individuals and companies how to make consistent profits from the stock and bitcoin markets

[@sanjiblamichhane]

The blessed generation gets high quality sh*ts for free.

[@niharranjanbiswas3812]

your side

[@sumthingnothingallestar7722]

its your credits to begin with, Andrew therefore your bias.

[@woohanrebel2549]

Can't correctly compute real wealth with the CP Lie. Something Andrew forget to mention.

[@firsttrademarkets7511]

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[@elysiumcore]

Should have bought Bitcoin ... especially 8 years ago

[@firsttrademarkets7511]

check us out to learn how to trade bitcoin kzbin.info/www/bejne/enO6Z6R6jdd5o9k

[@joshuagaa7009]

"trumped" lol

[@lautanax]

Why people in finance love the pie charts? (<a href="#" class="seekto" data-time="2850">47:30</a>) they are so useless!

[@gustavoadolfovasquezperdom1208]

Pues yo los odio... hoy en día hay muchas formas mejores de mostrar la info!

[@firsttrademarkets7511]

check us out kzbin.info/www/bejne/enO6Z6R6jdd5o9k

[@johnstfleur3987]

"ZERO."

[@Diego-tm3dj]

Windows XP looks so old.

[@rohanrishi2364]

The lecture starts at <a href="#" class="seekto" data-time="25">0:25</a> you're welcome