Kev

i thought it is the reason of rate of return.
* b4 L1 ]& A8 T9 E4 r. d* b. t* GCDs could have different ratings, AAA -> F,
$ _& j( U' \% B6 C( Jmore risky ones would have higher premium (interest rate) as a compensation for an investment.  W9 q3 H5 @  c+ j$ H6 h) n% C
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
1 M' I2 J" ?+ c+ |9 G2 p+ tin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.+ Q9 X7 E9 A- m( @' e5 l7 C
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.1 C6 L% {0 k/ _8 u
similar to bonds, CDs trading in the secondary market have different value at different times,
$ G, p" r2 K. ~normally the value is calculated by adding it's principle and interest. . H: Q# a  c* J5 S) @
eg. the value of the mortgage+the interests to be recieved in the future. , u, U( J0 m. @& U7 ?6 e  O: {
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.
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  b! d% p7 h+ |im not quite sure if the multiplier effect does really matter in this case.8 L6 x2 t! e6 C5 H/ R6 |* C6 Z
in stock market, it's the demand and supply pushing the price up/downwards.
) ]2 @" j- h0 y9 `. }For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,7 D: X: M/ z; O2 j* Q" B
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction." W5 A' H0 a3 ?9 Y! `  s
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.
% D3 e0 J9 M- _+ T& O3 T+ v, obut 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
% e7 n2 u6 i, c6 J( _4 jRefer to last example,5 W6 p5 n& K7 Z+ P2 o  z
that means bank A have no money because we borrow 10 dollars from bank A - @2 A; _, {' a6 e& I7 A
Because bank A doesnt have enough cash on hand - F% A& B) f) y2 l0 J
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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7 Q) r+ a, [. O: y* a& o+ c% W7 L3 [0 b5 I0 T0 z
A->B->C->D->E
: `, p/ Y4 e2 ]- M1 Mso does it mean if E failed to pay D, / u7 S2 k- e! B- D; j) q
all the B,C,D,E have to go bankrupt?
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7 I+ I4 i9 p: e/ {: O& Ethe multiplier just tell how much money created in a whole economy, 7 A: k- \  v$ j5 x
in this case it doesnt really matter how much money is created,
( z" t5 Y* d" w3 w+ b2 k4 P# tit's the problem of the debt itself.  w5 B1 ?/ {: J. F
the debt(securities) is bad, faulty, that harmed the whole system.