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Midterm

Test 1

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Department
Finance
Course
FIN 3715
Professor
All Professors
Semester
Fall

Description
Test 1Thursday January 19 2012136 PM 11912 The acent of moneyBold is when the movie stopped and he started talkingNiall Fergueson narrator for the movie Welcome to the world of moneyVideo came out after the housing bubble burst 0809Money plays a dominant role in all our lives50 mil ago incas first concept of money1532 incasfrancas piza and conquestadors came in search of gold They defeated the incas Discover the rich hill el dorado Had a history of forced labor Every male had to work down in the mines at some point Spain invades peru Find a mountain of silver They have free labor they can force 1 in 8 die in the mountain oSpain found all this but is now bankrupt Its a supply and demand issue oOne time decreasing demand Extracted too much too quicklyoThis didnt make spain richer just made prices go up higher 10 dollar billin god we trust oActaully trusting US to be able to have the funds to payCredoalso known as trust Housing collaps is also refered to ask credit crisis Didnt like to lend money because they didnt think they would get the money back Numbersromans left roman numerals New system of numbers was suited much better for money oApplication of mathmatics to making moneyGET NAME OF THE PERSONWilliam shakespear smerchant of viencemoney lender shilockloan sharkWondered why shakespear was antisemtic Choose a banker that was jewish Back in vince there were nt chrsitianwho was charging interest to other christians There were no prohibitions to jews lending money to christians usery restrictionoShow early credit scoreIf we are going to loan money we need to collect interest Which coverrs the risk that the person might not pay it back Once the government starting letting citizens loan them moneys He percieves that the government is mre trust worthy oWhen we created bondit became the rate that everyone had to pay Interest was also charged because people could loan to the government instead of just having it sitting These transactions remain the foundation of international trading to this dayShylockoIf jews stayed in Venice for more than 2 weeks they had wear a symbol type thingIn deutoonemyoA jew couldnt lend to a jew but he could lend to christians The price for this was social exclusion Hints the ghetto Credit came of age with the menci family Money lending became good The legacy of their power still surrounds people in Florence today 3 of the family became pope oHow did they pay for everything They were roughly foreign exange peopleThey conducted buisness on a bench behind a table o5 of the family was sentenced to death for capital crimes Then the family became legit There was no interest so no sin simply a deduction for changing one currency to another Important concept of disveristifactionoDont put everything in one basketoIf you are a bank and most of your buisness is in AG and a drought coes its bad for your buisness Minchii banking went all of It wanted to lower the risk and there fore the cost oThats the difference between loan sharks and banks By making bank bigger and more diversity and focusing on currencetly trading they increased buisenss It became a good buisness model Banking was just one contrubitution of italy to financeBond marketcame to fiannce wars The city states in northern Italy were in a war Each city hired military contractors would raised armysCost o wars plunged Italy city states into debt Florence was where the money was oFlorence became bi into debt But who did they borrow all this money from Themselves oThey were forced to make payments instead of paying taxes oForce citizens to loan money they will pay back the interest after the war original government bonds oCommon bonus questionswhere was the first bond createFlorence ItalyoAnother questionfirst bond market in Florence because the citizens could sell their bonds to each other There larger the debt of Italy the more bonds had to be issued The more bonds the less desirable they are Vince had suffered military reversals and the value of venetian bonds decreased Roughly like you give me 1000 I will give you a coupon every 6 month At the end of your contract you get your money back Let say you think the company might not win you could sell your bond to other people Bond market sets interest rates for the state as a whole Next big think was the rise of the joint stock company Which transforms our lives oAnother innovationstock market oHow much people are willing to pay for a part is how much they think the copany will make Current price of a stock reflect the anticipated future revenue Lowercreated the stock market bubble The lousisanan state meusem has the onl know portrait He killed a man and then fled to amsterdam which was the world
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