Kev

i thought it is the reason of rate of return.7 q9 O2 ?6 k- W$ H5 ^
CDs could have different ratings, AAA -> F,6 Y9 W7 H. J# s+ r' Q$ @7 W9 y
more risky ones would have higher premium (interest rate) as a compensation for an investment.
2 C1 E; j) `0 I7 Nmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,2 d. o( Y  n2 m0 D) {( U, m( l* c
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.; {- {$ q8 L; @
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
& K  {( z& y% O; b% ?1 osimilar to bonds, CDs trading in the secondary market have different value at different times,
9 m1 B5 G! H/ n) _" g2 fnormally the value is calculated by adding it's principle and interest.
9 N8 c. ?4 m: y" Z! n7 Peg. the value of the mortgage+the interests to be recieved in the future.
3 N) z6 U+ x$ w! `) dbanks 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.2 U4 e% [" ]) Q

& u6 y' a5 y6 I# S9 tim not quite sure if the multiplier effect does really matter in this case.7 w9 v4 N2 X" ?& W4 b
in stock market, it's the demand and supply pushing the price up/downwards.! F8 a& e/ ]4 B2 w0 u, D1 F" C5 v1 }
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
6 w( x* W+ Q9 ]: @" X6 p! i) s) GA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
; R! A% F1 E' c9 I: r1 n6 l( AThe 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. 6 M/ W4 N" T4 b9 [
but the value of their assets did really drop significantly.
4 N4 h( u, F" S3 X! v) V9 `8 ]6 e# t7 W% `) `4 p8 ^
[ 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
* T& E$ s% e2 h4 r6 [6 SRefer to last example,1 |: j4 |: M, N6 s2 D7 Q% B+ V) C
that means bank A have no money because we borrow 10 dollars from bank A
0 T9 c4 E/ X0 zBecause bank A doesnt have enough cash on hand / }# {' j# }7 T  L% N( i+ U1 Y
therefore bank A need to be bankrrupt ??? Am I right ?? ...

% _2 l) a2 T- b* s! u% O
- g( Q7 I5 R" p& d/ `9 r1 s" E, Y  b( V" ?+ p4 i- D& N7 y
A->B->C->D->E
4 d  q+ p2 t$ P& P% Xso does it mean if E failed to pay D,
6 ~' q7 V7 L. ~# k" q$ Pall the B,C,D,E have to go bankrupt?
! C8 A4 S$ D7 G& T( X
: s9 O" U# U% R, a2 j0 I3 L4 _: w
. x2 p2 m1 L- ~1 ethe multiplier just tell how much money created in a whole economy, + D4 U& B% e6 E% Q
in this case it doesnt really matter how much money is created,
$ _6 L0 p3 q4 r3 K- S$ L3 _it's the problem of the debt itself.) l6 V0 ^. t/ p" ^8 u
the debt(securities) is bad, faulty, that harmed the whole system.