Kev

i thought it is the reason of rate of return.8 Y% S5 B: |" k* G% K
CDs could have different ratings, AAA -> F,
$ |' g: K# D9 u' c$ vmore risky ones would have higher premium (interest rate) as a compensation for an investment.
4 T1 l  H7 M3 Fmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
6 R! I. e* ]3 v4 o3 q$ Z8 `1 }in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
# K& l" ]* |% D) q- u$ N- sAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
1 D/ ~" r$ H! V$ O, Usimilar to bonds, CDs trading in the secondary market have different value at different times,
( U7 N8 M' c; h; q; knormally the value is calculated by adding it's principle and interest. % B8 K# D' K$ i7 _% i
eg. the value of the mortgage+the interests to be recieved in the future. 6 e% r, S9 q- \  n5 q2 C$ J
banks who sell the CDs, could enjoy a few benefits like, the present value of cash and passing the risk of holding a debt to another party.6 Y6 M+ P, k2 N2 e4 _
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im not quite sure if the multiplier effect does really matter in this case.
4 J* S. r% V; G$ O2 ]1 s" vin stock market, it's the demand and supply pushing the price up/downwards.
/ g* }5 f; h9 ^, \+ {9 q+ A; ZFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,% P& ^" V& o3 Q7 b: {- i8 g6 ~
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
/ Q. i2 k" A" `The capital loss that ppl suffer nowadays, i believe, most of them does not really suffer a real $ lost yet as long as they dont sell their securities. 2 Z7 p  ^5 A! J* `6 b, ]5 J
but the value of their assets did really drop significantly.& A1 _. K. l1 c. o( q
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[ 本帖最後由 Kev 於 2008-10-8 07:26 PM 編輯 ]

Kev

原帖由 balachiDavis 於 2008-10-8 04:09 PM 發表 http://www.26fun.com/bbs/images/common/back.gif. h) u4 `: T% h4 p- G' u" T$ s
Refer to last example,
& R) i3 O1 f: ^  j2 S# I+ W' U! j7 {$ othat means bank A have no money because we borrow 10 dollars from bank A . x# x% O1 _7 C$ v& \+ I
Because bank A doesnt have enough cash on hand 8 e/ z# T- M' ?9 U- u
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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! Q3 T! G& k5 w& {0 w% ]A->B->C->D->E
2 {0 U' @5 e/ D5 g# @so does it mean if E failed to pay D,
2 |% p6 s( F( n) h9 w8 _' B4 F* [- pall the B,C,D,E have to go bankrupt?/ P* ?" ^( P6 i
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the multiplier just tell how much money created in a whole economy, ! C7 {1 @9 k1 }5 L" W) C9 [! x
in this case it doesnt really matter how much money is created,
( I4 l" ^5 r% W$ ?( Sit's the problem of the debt itself.
' I) H% S/ a4 G, Bthe debt(securities) is bad, faulty, that harmed the whole system.