Kev

i thought it is the reason of rate of return.
  \$ m  K% U' N2 m$ wCDs could have different ratings, AAA -> F,7 a  ^8 c$ b  K6 e' U
more risky ones would have higher premium (interest rate) as a compensation for an investment.7 W- q. n0 C3 [
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return," L1 I6 a9 D7 z
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.! x. H  f9 s; E. o, w2 r! G: s
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.$ @" H( W4 l6 u
similar to bonds, CDs trading in the secondary market have different value at different times,
( x0 ~5 D% c& r9 b! r2 jnormally the value is calculated by adding it's principle and interest. # C: q" t; b" l, a
eg. the value of the mortgage+the interests to be recieved in the future.
2 d9 r% o$ E  o7 `) U- |4 tbanks 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.$ \! y6 u9 w' g! \

2 Z. c8 A) Z+ c7 g. Y* Wim not quite sure if the multiplier effect does really matter in this case.5 r( @8 v, V& m( }" r/ M7 z
in stock market, it's the demand and supply pushing the price up/downwards.6 r0 G2 N3 V1 w. p3 l
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
8 s, e7 E' A8 [% o* {A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
$ E* C) H, A/ s/ S! nThe 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.
0 K  G/ v  C2 b, a; J; g% nbut 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
0 e, M! O6 D0 N- jRefer to last example,
* G1 S3 ^' P3 }' w. `# Kthat means bank A have no money because we borrow 10 dollars from bank A ! j* I6 t/ n7 j% `; j3 n4 W
Because bank A doesnt have enough cash on hand * L8 K; g5 f$ E/ c7 a4 Y
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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7 N9 i; i" ~' J: s: d5 k: C/ i6 S2 q, M+ M' ^, C- H
A->B->C->D->E
0 M" H; ~& i/ ^( G# Fso does it mean if E failed to pay D,
; J1 J* f8 H$ aall the B,C,D,E have to go bankrupt?+ [# R" h1 v+ d) F$ q

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the multiplier just tell how much money created in a whole economy, 8 @9 B$ m5 d9 `: l5 k* C
in this case it doesnt really matter how much money is created, 4 F# A$ A0 w& e1 I. g% w7 ]
it's the problem of the debt itself./ R; E, k. S. @- x  G  n* k
the debt(securities) is bad, faulty, that harmed the whole system.