Kev

i thought it is the reason of rate of return.
$ s# Z* A& s5 m$ TCDs could have different ratings, AAA -> F,) g, \% y8 j+ A8 }
more risky ones would have higher premium (interest rate) as a compensation for an investment.
, @& ~6 O& g! _5 Ymain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
: p4 v( g/ S( Z2 ^; _in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.: |+ K- G9 @- l5 [0 ~
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency., W7 T+ x3 `+ F8 \
similar to bonds, CDs trading in the secondary market have different value at different times,
9 l3 e+ Z: E0 E6 X, knormally the value is calculated by adding it's principle and interest.
' u  y8 o' O( \/ h% M  oeg. the value of the mortgage+the interests to be recieved in the future.
2 s: S( b! A% _) [8 c* s  Abanks 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.4 e; S& L/ ~* Z% U
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im not quite sure if the multiplier effect does really matter in this case.
; D$ t) B" {: @- nin stock market, it's the demand and supply pushing the price up/downwards.  H) A8 J2 i" m! K8 O7 [( o' g
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,# M6 F3 B8 T4 x: r# a: X! K
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
& R0 Z) V2 X( u& N1 O0 e) yThe 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. / N' B1 p# U9 p4 [$ {
but the value of their assets did really drop significantly.
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0 K3 s+ }7 M0 f' q) d0 {: S& X[ 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.gif7 w5 f+ n, U: Q; p% ?- h# W
Refer to last example,
- h$ ^0 f1 L! M* tthat means bank A have no money because we borrow 10 dollars from bank A . f' {9 I8 T4 I3 f' ^
Because bank A doesnt have enough cash on hand
# E8 b/ y( q  T: Otherefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E
' N  N' |& m: N$ V: Tso does it mean if E failed to pay D, 0 a) G4 Y  h* H( j% s5 B
all the B,C,D,E have to go bankrupt?
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( p  Q* S( g$ D, g9 F9 xthe multiplier just tell how much money created in a whole economy,
. o9 e2 g4 N* x6 }- U. M! O( n; @in this case it doesnt really matter how much money is created,
$ u' S. W" U/ D, o1 k) t$ Sit's the problem of the debt itself.
) c. E& Z5 D" S5 }2 \  othe debt(securities) is bad, faulty, that harmed the whole system.