Kev

i thought it is the reason of rate of return.
+ a& [# C. C5 ^( t, VCDs could have different ratings, AAA -> F,
. o0 n$ n$ Y7 @& n7 Y" ~* d: @0 amore risky ones would have higher premium (interest rate) as a compensation for an investment.+ f. Y- `( d! x- ~' E; R+ y
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,1 t! e) H+ ^1 T  _2 _) |0 P2 R
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.. ?+ \/ Q4 N" G  W6 U  [9 Z6 a
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.& M8 H6 `  a! S  [# ?. K! i
similar to bonds, CDs trading in the secondary market have different value at different times,# P+ m( l2 \* c+ M" o6 Q" X7 L
normally the value is calculated by adding it's principle and interest.
6 `6 V+ k4 }8 F4 s5 \3 x5 f* ^2 heg. the value of the mortgage+the interests to be recieved in the future.
# w# I4 c. r( C$ t! D: l0 _! Ebanks 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.! T5 S* c# a" v4 f, ^. u/ [) q

$ C3 L% f' `. b/ [, X3 f: iim not quite sure if the multiplier effect does really matter in this case.
4 E7 Z5 Z( F/ P7 l+ P! k9 p  Fin stock market, it's the demand and supply pushing the price up/downwards.
; K, v- _% @7 `, W, X6 V# dFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
; L7 x: s3 S1 f  f; {: J9 m5 `( ^A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.1 }% {1 [! A" d) J
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.   d, s( G0 X6 Z3 u6 q
but the value of their assets did really drop significantly.5 H2 b2 J9 H( |
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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
; a; E( j( D; k: W8 [8 rRefer to last example,
# H# g# j2 {" k6 S  J) Tthat means bank A have no money because we borrow 10 dollars from bank A 0 D3 G  z* u1 K% f% B
Because bank A doesnt have enough cash on hand
' \" `& e% m% N8 K6 Btherefore bank A need to be bankrrupt ??? Am I right ?? ...

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$ B! j0 v$ U$ J  k( B: Y
# z/ p9 ?: y+ _& r& l5 k2 IA->B->C->D->E
* X3 O" X' {4 D: p, u/ W) b: [so does it mean if E failed to pay D, ( V& P; b0 m8 u5 V
all the B,C,D,E have to go bankrupt?* t0 k0 J" S0 E
& g- D7 x+ A. J6 @/ _! ?9 |6 F

( l. o' L6 w7 L$ B/ `( ?% Fthe multiplier just tell how much money created in a whole economy, + _; c) y0 y! \. N' M. |
in this case it doesnt really matter how much money is created, * ?4 \' a  d  e
it's the problem of the debt itself.
  p1 S0 P8 l: M; o" H/ Y1 athe debt(securities) is bad, faulty, that harmed the whole system.