FINE 3200 Lecture Notes - Lecture 1: Real Estate Investment Trust, Investment Banking, United States Treasury Security
Document Summary
In addition, this housing price bubble will eventually burst and society as a whole (and most likely taxpayers) will endure the damage. The bank loan is a financial liability for lanni. (lanni"s iou is the bank"s financial asset). The cash lanni receives is a financial asset. The new financial asset created is lanni"s promissory note (i. e. , lanni"s iou to the bank): lanni transfers financial assets (cash) to the software developers. Lanni gets a real asset, the completed software. No financial assets are created or destroyed; cash is simply transferred from one party to another: lanni gives the real asset (the software) to microsoft in exchange for a financial asset, 1,500 shares of stock in microsoft. If microsoft issues new shares in order to pay lanni, only then would this represent the creation of new financial assets: lanni exchanges one financial asset (1,500 shares of stock) for another (,000).
