Kev

i thought it is the reason of rate of return.
3 G: \- ?, s# F1 e' B6 y$ bCDs could have different ratings, AAA -> F,
/ h! X/ |! r1 o% r1 m, Zmore risky ones would have higher premium (interest rate) as a compensation for an investment.6 Y& D9 ?( K2 C$ C4 F
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
+ x+ ^7 h9 b- Z& l- Q  }in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.5 n9 C, e( Z/ ^9 J+ X7 F
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.& w9 Z; L7 W7 Q. {
similar to bonds, CDs trading in the secondary market have different value at different times,
% W5 `+ K& A8 k, j6 W) B, W8 |% knormally the value is calculated by adding it's principle and interest. ' }* G# N% g% g" \8 W# \) H
eg. the value of the mortgage+the interests to be recieved in the future.
; m8 A# q3 c7 q$ ~+ Z' Rbanks 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.7 S$ t3 Z1 s( Y4 ~* }0 y
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im not quite sure if the multiplier effect does really matter in this case.+ p; h3 \# E* ]7 |) ^2 b7 }
in stock market, it's the demand and supply pushing the price up/downwards.
$ f4 f( L! P  @For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,6 z8 ^' o4 J: a: N; f+ T' B- W+ i
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
6 |( ]9 K8 F( `0 ]3 f4 _0 R' t) BThe 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.
5 H; o! s. v" @' N4 dbut the value of their assets did really drop significantly.; n. T. R9 _# [7 w3 C) l9 a( u

9 q% Q* Q3 J" W4 u* {9 i) d& X( M[ 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
+ E/ X* ?6 c7 W, n' wRefer to last example,1 W- E% b. a7 Z$ ~8 b$ E
that means bank A have no money because we borrow 10 dollars from bank A & w" z, A4 c8 O) t
Because bank A doesnt have enough cash on hand 3 c% s- t& N& k* g: q
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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( v9 K& A3 g% A/ y- A  l6 IA->B->C->D->E* B; [% f& J- B8 F+ d5 [0 }" R: q
so does it mean if E failed to pay D, & ~" Z4 N! S3 m/ K: A* }( w7 ]
all the B,C,D,E have to go bankrupt?
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/ C" C6 f, Q5 w+ j: Q- |- hthe multiplier just tell how much money created in a whole economy,
8 z) ]/ {  T$ I! i; [1 [  ~in this case it doesnt really matter how much money is created,   [5 k' }3 E7 Z! a
it's the problem of the debt itself.0 l* Y4 o. _3 s$ Z; b
the debt(securities) is bad, faulty, that harmed the whole system.