Kev

i thought it is the reason of rate of return.& L" A5 X3 z$ A* n" ~) ~# u6 Y
CDs could have different ratings, AAA -> F,' u9 _4 f# D- Q6 @# W
more risky ones would have higher premium (interest rate) as a compensation for an investment.
, ~3 g7 F- [* T5 gmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,9 p" h4 Z1 O" H- `$ h. A
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.+ s1 B$ u) ~- C7 i2 ]' d& S5 M5 D5 X
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
, @. F2 y) B% a7 p3 \  t/ {similar to bonds, CDs trading in the secondary market have different value at different times,+ ~' {( t1 {' Y4 ^2 k! o* g. @
normally the value is calculated by adding it's principle and interest.
5 S1 a9 ?: e1 I! u: xeg. the value of the mortgage+the interests to be recieved in the future. 9 s, h$ L- _% P8 p
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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8 i, ~  m7 M. i5 x& uim not quite sure if the multiplier effect does really matter in this case.
/ n2 |- O+ g2 I. {7 din stock market, it's the demand and supply pushing the price up/downwards.- s( z5 j( ~- ~1 }* `- \: K: u5 J7 Z% P
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
, r) d! k; X' R1 l" aA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.# P8 G  w. q+ E% Q$ Z) g! e
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. ' h- |1 `* Y4 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.gif
8 I7 _4 t& I9 _1 ]8 s. G. qRefer to last example,1 a2 ]( T2 F9 |: \0 b) F
that means bank A have no money because we borrow 10 dollars from bank A 6 s  K; c/ \8 ~" [, |  [- s
Because bank A doesnt have enough cash on hand & Y9 c, m* p9 Q
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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7 Z8 X% j( e' ZA->B->C->D->E9 t) `( U3 P1 T9 O' Z$ S
so does it mean if E failed to pay D,
* c. x' x- ^3 `5 d6 }+ U- t$ call the B,C,D,E have to go bankrupt?
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the multiplier just tell how much money created in a whole economy,
6 C$ J9 {. R- U% _1 O" b% Jin this case it doesnt really matter how much money is created, ) u+ B, T& H. [* `  A; u: `8 z
it's the problem of the debt itself.
  ?" g4 }; c  D+ G" Tthe debt(securities) is bad, faulty, that harmed the whole system.