Kev

i thought it is the reason of rate of return.' ]  }: h9 ]7 ?# s5 E% e
CDs could have different ratings, AAA -> F,
1 s9 n( L6 ]' Ymore risky ones would have higher premium (interest rate) as a compensation for an investment.
) L8 f* C& Z7 T- @, A" r! m9 e8 Amain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
& P$ Y9 q* [' B4 I2 Lin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.0 F  A6 O" M( |) \( S
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
0 e6 v" M, j+ B, s: w! Vsimilar to bonds, CDs trading in the secondary market have different value at different times,
2 s# O  p/ y" d' M3 L* jnormally the value is calculated by adding it's principle and interest. 5 V0 x6 p5 V' {4 a/ N
eg. the value of the mortgage+the interests to be recieved in the future. 1 B5 L( T  O  H- C# p; X
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.
/ x1 `1 A" y1 G" @
9 J" v0 Q2 g& \7 Z9 wim not quite sure if the multiplier effect does really matter in this case.1 }- D/ r- T' v$ O1 Y
in stock market, it's the demand and supply pushing the price up/downwards.% A: Q4 ]2 g8 A
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,& I! U* Y* Q) L8 V* I7 @
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
% U5 G) |. `- N) d' fThe 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. 9 T" N; n1 h3 `: @
but the value of their assets did really drop significantly.
: C' X0 J4 Z. [$ T- I/ x' M
2 v" p; K0 Z2 o- ]& c) \[ 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.gif6 W+ K. u1 \" U% b
Refer to last example,
7 s% {+ O* q9 _. uthat means bank A have no money because we borrow 10 dollars from bank A
9 @) L! h  `- e* i1 j6 _Because bank A doesnt have enough cash on hand
2 R! \/ y& ~5 ~therefore bank A need to be bankrrupt ??? Am I right ?? ...

. V0 g5 z7 d3 S& @( n3 A; Q
0 [  m' C. I1 a" U
  m& a/ H" o1 X' u7 q& e5 `, m
A->B->C->D->E1 u! P' Z9 ?9 K- T+ x
so does it mean if E failed to pay D, # o5 _& Y5 s3 n) j
all the B,C,D,E have to go bankrupt?+ {  B/ l: Z4 m) d. o' P2 \- C7 w0 e

! A6 L. {" C1 e! j1 u8 U5 C
- j' M2 H5 J3 I/ I/ @the multiplier just tell how much money created in a whole economy, 0 _" o3 Z6 i( V1 i/ m) Q! L
in this case it doesnt really matter how much money is created,
# m: g( i7 ?, N+ W3 K7 rit's the problem of the debt itself.
( \4 @7 w; c1 R- |the debt(securities) is bad, faulty, that harmed the whole system.