Kev

i thought it is the reason of rate of return.
' W1 W* u# o  b/ R$ k7 S0 r# yCDs could have different ratings, AAA -> F,
- F1 l# c7 o$ o$ i0 ^# mmore risky ones would have higher premium (interest rate) as a compensation for an investment.' j# }2 W7 p. r
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,4 W, {+ g4 n+ s" V2 n
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
/ t# U( q& n1 l, |3 A5 v3 AAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency./ e* H, `7 e* E8 ^& ]
similar to bonds, CDs trading in the secondary market have different value at different times,
: @$ }' j9 r, d# {normally the value is calculated by adding it's principle and interest. 4 D4 }% {1 |& r% c
eg. the value of the mortgage+the interests to be recieved in the future.
# x2 D$ A# c4 Fbanks 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.) y1 V  q4 R  ]! t) r

! ?( }! M% G4 R$ \3 o8 G! }im not quite sure if the multiplier effect does really matter in this case.* T3 c5 \6 r- [6 q) `
in stock market, it's the demand and supply pushing the price up/downwards.5 {% ^6 _! S9 c% T2 |# t
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
4 a; R3 n2 ?/ r; z6 RA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
9 a# n% \# O" Y5 `4 `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. 4 Q$ u5 A1 A" y3 z6 q; }2 o
but the value of their assets did really drop significantly.
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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
8 W1 R' m; d  D1 wRefer to last example,0 S4 ~; F7 G# r6 P3 V; }, A. K% {
that means bank A have no money because we borrow 10 dollars from bank A   C2 Q& a9 o) j, J# _! P7 L
Because bank A doesnt have enough cash on hand ; k3 G0 _( R2 f
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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3 L& d- ^% ^1 E' E
& n# K- g7 x+ V+ N( r+ |A->B->C->D->E
: a- f5 q' k! D& K5 Y$ Cso does it mean if E failed to pay D,
# u/ q' t8 c( N, n+ K) nall the B,C,D,E have to go bankrupt?
; \9 R3 v; x) R4 L0 G& K* P( w" H1 X0 J5 u! ^' `- G

, C; n; G0 a, c1 i& W9 Fthe multiplier just tell how much money created in a whole economy, , u3 I9 z* u. n$ N# u1 y: w, a' g
in this case it doesnt really matter how much money is created,
- b. v) R/ Y+ q! g5 x6 N; zit's the problem of the debt itself.
6 U. A6 O) i7 vthe debt(securities) is bad, faulty, that harmed the whole system.