Kev

i thought it is the reason of rate of return.5 v( s7 h1 z; ]) Y3 d: \( Z
CDs could have different ratings, AAA -> F,( w* x' V6 p5 K0 @$ n9 G5 _! x
more risky ones would have higher premium (interest rate) as a compensation for an investment.
7 E% s3 s) G3 S' G8 lmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
  B, }# j5 V9 m! g+ J( Zin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.5 d" r6 ~: U9 p: z
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.% G; O. x! l  F% b2 ?  B3 u4 ~
similar to bonds, CDs trading in the secondary market have different value at different times,. z4 ~( E+ A! x  C7 Y9 \; I
normally the value is calculated by adding it's principle and interest. 0 h  u$ B0 M9 V! @
eg. the value of the mortgage+the interests to be recieved in the future.
9 p5 O  Y6 H: S. C6 R4 [6 }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.; j# I7 S: c5 _0 o9 A! ]" ]( K5 c
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im not quite sure if the multiplier effect does really matter in this case., M/ i: ^1 t6 m
in stock market, it's the demand and supply pushing the price up/downwards.: c% p% r' A5 t' e
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,* I) K+ J( E( @% M7 N
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.2 \3 l# a9 h7 C" V$ B
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.
# s: H' g' I- L* n, b3 \( _but the value of their assets did really drop significantly.+ g' a8 D$ H: |+ s( \
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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  }. K- j$ {) O; D
Refer to last example," O! n1 k4 s5 I* k9 T& P6 O
that means bank A have no money because we borrow 10 dollars from bank A
7 D+ O* x1 S1 ~/ v4 T) h% {# XBecause bank A doesnt have enough cash on hand
4 a1 v4 L+ {( V( {4 d9 z2 Dtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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0 J+ J6 r* ~, \/ x; c. t8 t$ ?7 qA->B->C->D->E
. y; s; c9 U- b8 p5 Rso does it mean if E failed to pay D, ; G6 P7 y6 `2 ?- O
all the B,C,D,E have to go bankrupt?
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9 D8 A6 X: L7 w5 ^% A; g, Hthe multiplier just tell how much money created in a whole economy, ! a* x1 J4 U* B; G. V% ]  h, h  K8 E* N
in this case it doesnt really matter how much money is created,
/ y) N$ y5 r! [+ Xit's the problem of the debt itself.
1 z& z' y$ z, J3 ?! Gthe debt(securities) is bad, faulty, that harmed the whole system.