8. How a Long-Lived Institution Figures an Annual Budget. Yield

Financial Theory (ECON 251)

In the 1990s, Yale discovered that it was faced with a deferred maintenance problem: the university hadn't properly planned for important renovations in many buildings. A large, one-time expenditure would be needed. How should Yale have covered these expenses? This lecture begins by applying the lessons learned so far to show why Yale's initial forecast budget cuts were overly pessimistic. In the second half of the class, we turn to the problem of measuring investment performance, and examine the strengths and weaknesses of various measures of yield, including yield-to-maturity and current yield.

00:00 - Chapter 1. Yale's Budget Set
03:37 - Chapter 2. Analysis of Yale's Expenditures and Endowment
31:51 - Chapter 3. Yield to Maturity and Internal Rate of Return
51:52 - Chapter 4. Assessing Performance of Coupon Bond

Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses

This course was recorded in Fall 2009.