ShmoopTube

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finance a la shmoop what is defeasance? oh it's been a tough slog for our [Superman flying through the air]

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friends Superman competition from x-men Iron Man Facebook

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yeah he's just cutting well tired so needing something else to do he finally

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built a home in his Fortress of Solitude nice four-bedroom ranch house with an [Ranch house bedrooms appear]

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enclosed patio all new steel appliances and an open-concept kitchen for you know

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when the Louis comes by or some of the guys but work has been slow so we had to

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take out a mortgage yeah a million bucks and well you know he wanted a nice man

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cave although Batman still rules the roost in

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that department but we're not gonna go there [Batman in a cave]

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anyway the mortgage cost 6% a year what he had bad credit all those buildings

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Superman wrecked yes someone's gonna pay for him right so the million bucks cost

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60 grand a year to rent and that rent well it kind of stresses him out he

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wants to not have to worry you know so what does he do well he buys bonds yeah

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Superman buying bonds he had some extra cash left over from well when the city

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of Metropolis rewarded him financially for you know reversing time to save that [Earth spinning]

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busload of kids in fact he had 800 grand just sitting around and the bonds he

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bought had a yield of 7% or said another way he collected rent on his eight

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hundred grand of 56k a year and that helped a ton because that 56k covered

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almost all of the 60k he had to pay on his mortgage and note that Superman just

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cuz he's you know Superman he didn't pay any taxes so gross is net here people so

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said another way soup here defeased all but four grand of his mortgage

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obligation in buying those bonds which offset his monthly cash costs and why

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wouldn't he have just paid off the mortgage well for this story there's a

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prepayment penalty meaning he's not allowed to pay off early without all

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kinds of cash penalties you know in the bank loaned him the money they wanted to

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be certain to get the minimum amount of interest payments over the shortest

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possible time period you know to make up for all that perceived risk [Superman cartoon moving steel gurder]

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considering all the high-powered enemies he's you know facing all the time

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because yeah when it comes to risk it's a you know kind of Superman's kryptonite [Superman screaming]

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