Kev

i thought it is the reason of rate of return.
; x% n$ L* A( y2 _' p. aCDs could have different ratings, AAA -> F,
, `2 h, U2 ]$ o6 W/ C; Ymore risky ones would have higher premium (interest rate) as a compensation for an investment.' p4 S/ }4 W, c/ @; {
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
! {- {( k& F* X+ T  g7 k2 C0 Xin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
  w8 E) v3 a2 m3 k- r6 A/ NAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.$ f: J( r- Z( s" A% n# l0 G' a- V, D
similar to bonds, CDs trading in the secondary market have different value at different times,% A6 |+ Z9 r' }; k' z
normally the value is calculated by adding it's principle and interest.   e) \2 l7 w) X: ~; _" O$ D/ [
eg. the value of the mortgage+the interests to be recieved in the future.
. I+ b& x: d7 W- l3 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.
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im not quite sure if the multiplier effect does really matter in this case.# z. M  d2 ?& ~* O5 c8 U
in stock market, it's the demand and supply pushing the price up/downwards., l3 B3 D4 K# T$ `, z
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
8 [1 j8 N* s7 ~4 ?A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.3 d( y0 _2 f, T" \
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.
$ H. l& b# u/ }% m% ibut the value of their assets did really drop significantly.! F& t# y, ]8 n5 P7 c0 ?& C. Y
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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
5 |) c4 O  T7 k! S& }. o1 A( XRefer to last example,
) P! h' F9 R5 ^0 z: B$ F  p/ tthat means bank A have no money because we borrow 10 dollars from bank A
* g7 Z+ l9 X) @: u7 g2 GBecause bank A doesnt have enough cash on hand
1 K, M7 M" Z+ Stherefore bank A need to be bankrrupt ??? Am I right ?? ...

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. i2 e& c3 G, e3 ^$ }3 ^* O1 WA->B->C->D->E: z: v1 s' L- A( e. w- Y
so does it mean if E failed to pay D, 8 m+ u2 K/ K3 Y
all the B,C,D,E have to go bankrupt?
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: G( r2 p7 I% ~; k% V9 o9 Tthe multiplier just tell how much money created in a whole economy, - A8 A# ~1 j3 p7 c# L+ B
in this case it doesnt really matter how much money is created,
# {9 v! W( c4 r: Sit's the problem of the debt itself.$ ~6 \  N* j  E( W1 l& t' U
the debt(securities) is bad, faulty, that harmed the whole system.