Debt, Bonds and Default

Insights into Mathematics

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We continue our historical investigation of Banking, somewhat simplified. Here we want to talk about the Credit / Debt nexus that orients much of the financial world. We look at the serious cost of debt, which is interest, and the possible cost of credit, which is the possibility of default.

To quantify things, we derive the most important formula in banking / finance, which describes what happens to a loan with a fixed interest rate, and periodical deposits, or repayments.

Then we introduce Bonds, both Government and Corporate, which have come to play such an overwhelming role in 20th century finance.

CORRECTION: On slide 5, the last column where d=11, the total interest paid should be $176.82, not $209.82.

This is part of the Wild West Banking playlist at https://www.youtube.com/playlist?list...