FINA 469 Lecture Notes - Lecture 2: Emerging Markets, Life Insurance, Systematic Risk
17 Jan 2017
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Current status: statutory rates are higher than most developed countries effective rates (actual payment) are lower than most developed countries. Inversion: get headquarters in a foreign country by creating a small company that buys out original company. Tax breaks on debt interest: incentive to acquire more debt. Taxable income = sales in us - expenses in us. Incurs systematic risk: unavoidable, affects everyone (unsystematic is specific to a company) Households and savers are net savers (earnings > spending) Government: borrowers and savers (issue debt or collect revenue) Financial intermediaries: banks, investment companies (mutual funds), insurance companies, pension plans, private equity, venture capital. House/home buyers: prices go up, sell house because value has increased, buy new house. Freddie mac/fannie mae: gov"t sponsored entities in the mortgage market. Investors: institutional (pension, life insurance) buy bonds from investment banks. Prices have to go up for another transaction. Creates a bubble --> bubble popped and caused crisis.
