Kev

i thought it is the reason of rate of return.
6 B% J9 g+ ~+ J! i( aCDs could have different ratings, AAA -> F,
2 o7 r7 a3 z# j; C2 S3 gmore risky ones would have higher premium (interest rate) as a compensation for an investment.7 ^& p- S- V8 q+ c+ S
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
. W  u  K; d+ b% q) e; Q- F/ `in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.! X, M! p; f) C/ u& }; r
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
; m! e7 S: m7 B! ]& Isimilar to bonds, CDs trading in the secondary market have different value at different times,5 V. n: [. u8 R9 h+ O4 U
normally the value is calculated by adding it's principle and interest. ) J. M* Z  C% s
eg. the value of the mortgage+the interests to be recieved in the future.
! j2 ~7 X4 @& 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.; h1 C3 W0 ?5 ~1 b8 F0 G* x" |( l

- j4 a) w* }6 k  C4 Cim not quite sure if the multiplier effect does really matter in this case.
9 t0 \0 Z' ^$ q' c& W) din stock market, it's the demand and supply pushing the price up/downwards.
; j8 R7 i% ~$ a: ^For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,) V) K- N- t) P; k% Y7 s
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.; ~/ N1 C1 W7 Q0 ?( b+ b& P
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. # ]7 M! f' B8 h8 w+ O3 o
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.gif4 _+ x% m# u  C. ~/ P/ b
Refer to last example,' T5 _/ O& {' [4 N6 O) P6 K
that means bank A have no money because we borrow 10 dollars from bank A 9 X. V# V+ k: w# Z
Because bank A doesnt have enough cash on hand ) g( I7 x* y/ N  {' t
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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5 H3 o8 m5 g9 E3 ~+ B+ e3 ?A->B->C->D->E5 V2 J& [8 K7 D  h
so does it mean if E failed to pay D, / ?; c" T0 O3 D+ b4 H7 Q: X  q
all the B,C,D,E have to go bankrupt?+ R, `/ g2 S; l2 e8 Q' C
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% E2 J! ?5 E- \0 _the multiplier just tell how much money created in a whole economy,
5 @. U5 p3 {7 v2 I9 s3 Pin this case it doesnt really matter how much money is created, * v& N! |) Z- w+ D
it's the problem of the debt itself.9 R* h$ ~; y0 r, S+ Z: j/ d
the debt(securities) is bad, faulty, that harmed the whole system.