Kev

i thought it is the reason of rate of return.
7 h1 [+ M5 b; Q8 vCDs could have different ratings, AAA -> F,3 i( I: B& U8 v$ o  |& q" [6 ]
more risky ones would have higher premium (interest rate) as a compensation for an investment.
2 ?" E2 B/ n, ~! z2 w' zmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
6 m# Q& C! F0 c2 q# ^in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
4 [1 w# l. Y! d! f6 R6 ?8 O9 v) }Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.7 E/ P; v/ m- A& D7 T
similar to bonds, CDs trading in the secondary market have different value at different times,5 [6 F9 Z: ]) U6 k  `, z. E
normally the value is calculated by adding it's principle and interest.
1 K$ Z- z( Y7 m5 S/ W/ Seg. the value of the mortgage+the interests to be recieved in the future.
7 a! L% E8 x# X: g, G4 @& Bbanks 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 Z+ \2 M* {+ }8 m. L1 t8 c4 K3 ^

0 p- S7 j, @5 N: b4 q2 pim not quite sure if the multiplier effect does really matter in this case.
/ w/ q' Z; m5 ]7 w4 ?in stock market, it's the demand and supply pushing the price up/downwards.
. M4 J" R. \2 MFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
, \! t+ c$ m, |A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
# X2 l" S: i3 @' r2 M9 fThe 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. 4 ?1 M1 D2 C( t$ G4 L* f
but the value of their assets did really drop significantly.! K: ?8 D7 r0 ^& W/ l( r
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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 w1 v3 u" K4 y  J4 z: S; c9 O" JRefer to last example,
: ]0 v' G3 i. M5 Xthat means bank A have no money because we borrow 10 dollars from bank A 2 M4 t4 y# R9 E
Because bank A doesnt have enough cash on hand
9 t& s' w8 x, T/ Ltherefore bank A need to be bankrrupt ??? Am I right ?? ...

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1 B. x  w4 l+ a/ m0 SA->B->C->D->E( I1 ^$ h) y- G" G
so does it mean if E failed to pay D, 8 w1 y, }  S2 N" U" g& ^
all the B,C,D,E have to go bankrupt?
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7 L3 P9 s9 K# J; Pthe multiplier just tell how much money created in a whole economy, * q' z1 Q# U$ J1 N1 U% T# o
in this case it doesnt really matter how much money is created, " ]9 v+ e& @# S9 I! Q5 V. ?
it's the problem of the debt itself.
/ r- p# w; O/ i4 p/ n8 i, V% ~3 `$ Othe debt(securities) is bad, faulty, that harmed the whole system.