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Notes lectures and tutorials Economics of Banking $7.32
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Notes lectures and tutorials Economics of Banking

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Notes of the lectures and tutorials of economics of banking year . Summary

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  • June 11, 2022
  • 15
  • 2021/2022
  • Class notes
  • Dr. d te kaat
  • All classes
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Notes tutorials:




Yield to maturity:



Zero coupon bond, price 1000 and pv is known 

Yield to maturity upward sloping:
1) According to the expectation theory, short-term interest rates are expected to rise.
2) According to the liquidity premium theory, investors prefer short-term bonds over long-
term bonds and therefore they require a positive liquidity premium to invest in longer
maturities.

Price for default-free bond that matures after 4 years, 4% coupon face value 1000 =




With risk premium, just add on the I for every year.

Spotrates: of




Tutorial 2.

, Lecture 4.

Dividend discount model, valuations of stocks. (fair value of a stock, as discount model gives
a price for the equity). Problem is that a lot of companies do not pay dividends  use
residual income model.




Residual income: measure of “abnormal” earnings. Value = current book value +
discounted value of abnormal earnings.

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