Kev

i thought it is the reason of rate of return.
8 |* s. \$ g7 K8 T7 O5 K2 R* A# y5 CCDs could have different ratings, AAA -> F,
5 _) D, T7 m" i1 D3 s1 \8 Rmore risky ones would have higher premium (interest rate) as a compensation for an investment.
- i' T6 x4 m+ ~& }- ~4 p  Qmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,( T6 [" C" T) {
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
) W& |- l6 o4 E& l% Q/ C) @; v: cAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency./ M% k' x: @& m& c: X8 N4 I! O6 n' T
similar to bonds, CDs trading in the secondary market have different value at different times,
' q' L8 R( R( i$ q. pnormally the value is calculated by adding it's principle and interest. ; v* W* L+ a3 }# z, e$ L
eg. the value of the mortgage+the interests to be recieved in the future.   u: ?0 y2 M1 P+ I7 S
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.7 X; d2 x8 `/ a- X

& {& C6 Q( v) l8 Iim not quite sure if the multiplier effect does really matter in this case.5 U1 _+ X! Y2 J" {7 Y$ o9 S
in stock market, it's the demand and supply pushing the price up/downwards.
( A3 j3 ]  _: z9 f% KFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,1 }/ E* V/ I! |3 ]+ @& p% A( Q
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.$ p) I$ b3 _6 K( o7 n% k: L
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. $ M$ v0 N' U+ a
but 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/ }1 @+ [5 J& n1 G* Q9 j
Refer to last example,6 E" o5 O; @! ~6 @
that means bank A have no money because we borrow 10 dollars from bank A # H$ ^; ]/ Q& V/ V0 [0 E
Because bank A doesnt have enough cash on hand 7 r, p" @1 `2 K$ o: E0 k- O5 Z4 ?" {
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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: G8 P! D4 \# C& @+ o; f* C2 E! g  X* R7 Y
A->B->C->D->E7 N9 w, |% H- Y
so does it mean if E failed to pay D, ; z7 x4 x8 e' y
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,
6 F4 W0 }- k2 Y7 oin this case it doesnt really matter how much money is created, " N0 b* V& s; Y6 G  |
it's the problem of the debt itself.
5 Y, R, n4 c6 g- H  ^4 P/ |# lthe debt(securities) is bad, faulty, that harmed the whole system.