2024-12-01 18:33:48 +02:00
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#+title: Section 8 | Lesson 44 - Debt/Bonds, Interest Rates/Yield Curves, Equity
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#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />
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* Links
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- [[./../mba-main.org][TOC | Business]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4282976#overview][S08:L44 Debt/Bonds, Interest Rates/Yield Curves, Equity]]
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* Notes
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2024-12-02 18:43:13 +02:00
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** late stage VC & VD round
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- year 5-6
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- best VC: Meritech
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- best VD: Silicon Valley Bank
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** Finance & Accounting differences
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*** accounting
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- accrued revenue and expenses
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*** finance
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- cash revenue and expenses
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- cost of capital (cost of getting money)
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- cost of equity
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** Debt
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- nominal interest rate = interest rate of a bank loan
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- real interest rate: rate that government loans banks
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- liquidity risk: how fast can one turn all his assets to cash
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- cost of debt = liquidity risk + inflation risk + defautl risk + maturity + real interet rate
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- risk free rate = real rate of interest + inflation premium
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** yield curve
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2024-12-09 17:16:13 +02:00
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- x axis: time
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- y axis: interest
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- you can plot on that curve what the interest rate is going to be longer term
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** calculate inflation
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- bureau of labor statistics
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- bls.gov
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- calculate how much stuff you bought in one year is worth at present
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- https://data.bls.gov/cgi-bin/cpicalc.pl
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*** what is inflation
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- to raise interest rates the gov sells bonds
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- banks buy bonds
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- bonds say the gov will buy back the bond at a rate
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- this takes money out of circulation
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- money is more scarce it is worth more
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- when they want to lower interest rates they buy bonds
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- this puts more money in circulation
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*** most important tool of government
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- if gov cant control the price of bitcoin, it has less power
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*** inflation has been negative at times
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- so check out the CPI Inflation calculator
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- https://data.bls.gov/cgi-bin/cpicalc.pl
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an-entire-mba-in-1-courseaward-winning-business-school-prof
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** basic needs to assess risks
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- a mature cash rich company pays a lower debt
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2024-12-09 17:45:51 +02:00
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** underlying economic drivers
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- we all really on ratings agencies
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- S&P
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- Moody's
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- better the rating, lower interest on debt
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- AAA (best)
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- AA
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- A
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- BBB (investment grade)
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- anything higher than this is considered OK
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- anything lower is "junk bond" / "high yield"
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*** investment grade
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- anything above BBB
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- Default Risk Premium (DRP) is less than 1% above US treasuries rate
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*** junk bonds
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- BB and below
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- DRP is 5% above treasury rates
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*** why this matters
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- early stage companies that take loans get junk bond rates
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- this is why it's better to get equity / VC financing
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- low inflation leads to startups
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