Kev

i thought it is the reason of rate of return.! z$ b0 X" Y& v9 B
CDs could have different ratings, AAA -> F,4 b  u: V: {! Z2 I, {. }
more risky ones would have higher premium (interest rate) as a compensation for an investment.
8 q( _/ i9 g  j# u* @main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
8 l$ k( O1 {2 Y- X. hin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
1 v. Z3 O- M  q# rAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.- c1 D, f4 F  ^& c
similar to bonds, CDs trading in the secondary market have different value at different times,
; t2 j2 M. d1 g4 y  N' Lnormally the value is calculated by adding it's principle and interest. + U" K9 `8 O/ p8 j7 v
eg. the value of the mortgage+the interests to be recieved in the future. / v8 E, h8 J( X- j% m& I
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.9 n# F$ m# W- }, l/ Y9 \
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im not quite sure if the multiplier effect does really matter in this case.: Q( _  ~0 C/ O
in stock market, it's the demand and supply pushing the price up/downwards.. S- d( b! K& U9 O3 v
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12," p* J( Q# Q5 y1 `& d' Y5 {6 m
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.7 e0 Y9 n+ Z7 _7 o. C$ U# i  `" S
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. 1 k' R  [, S! S- w9 l  G1 \
but the value of their assets did really drop significantly.9 e" [" u; V* K% z8 l* c2 p' F
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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- x' O$ }2 M: a
Refer to last example,
3 T- f+ Q, H" p/ z" s" dthat means bank A have no money because we borrow 10 dollars from bank A
( q0 @0 n8 y( D$ [6 n# {  HBecause bank A doesnt have enough cash on hand
. R- k8 r6 J8 H, T# O( W$ ctherefore bank A need to be bankrrupt ??? Am I right ?? ...

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; {5 x/ J( N5 Q( f1 D  C! bA->B->C->D->E, i4 `+ P4 Q2 ~: f# ~& Z- p- C$ b
so does it mean if E failed to pay D, ) p/ S8 ^! G: v9 d+ P0 G
all the B,C,D,E have to go bankrupt?
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the multiplier just tell how much money created in a whole economy, 9 d. C' A, r- L* l0 g% ]. ]: X
in this case it doesnt really matter how much money is created, + e" K$ Z" s, l; O8 Z: n$ V( v
it's the problem of the debt itself.
; J9 g9 I, l; a7 v3 hthe debt(securities) is bad, faulty, that harmed the whole system.