Kev

i thought it is the reason of rate of return./ B, o' T: ~- g: C5 F, f$ q4 o
CDs could have different ratings, AAA -> F,5 ]/ y/ M, ^. Q# Z* e  Q
more risky ones would have higher premium (interest rate) as a compensation for an investment.
! r! N* |4 p8 o+ a& Mmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
: T5 a9 f" R# c3 C1 H, e( F4 Pin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.. t- W$ K+ ~9 H* e
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
  c7 t; b! Q4 Ksimilar to bonds, CDs trading in the secondary market have different value at different times,1 K4 T6 G0 }3 ]3 R
normally the value is calculated by adding it's principle and interest.
2 V2 ]" d: ]" aeg. the value of the mortgage+the interests to be recieved in the future. 1 b. C7 }* S; U; O# u& Q) ?
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.' m* F7 H+ f9 r6 |" y' k
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im not quite sure if the multiplier effect does really matter in this case.: i3 [* D( r% |7 O3 o
in stock market, it's the demand and supply pushing the price up/downwards.0 Y7 H' k" W& D- v- Y3 z# {) C/ w
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
& t( a( k2 q6 a1 N$ pA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
2 {. J+ ^. O; E  B* a, S% sThe 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.
# J8 S, n$ T& V2 K/ w5 lbut the value of their assets did really drop significantly.# O$ k& h2 [( w  s
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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
, x6 M$ y4 r" pRefer to last example,# J( t1 L1 I6 F" |5 ]
that means bank A have no money because we borrow 10 dollars from bank A
& K! X2 ?% |3 A8 P0 WBecause bank A doesnt have enough cash on hand 6 e  ^' l5 D% k9 \
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E0 b4 r# D  w1 e( X* x1 X0 A1 g
so does it mean if E failed to pay D,
( S6 F9 p  f8 iall 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, ; {% B! V  ~  I6 e9 J4 _9 I/ z% B
in this case it doesnt really matter how much money is created, 6 K. D% h! A5 ]) F
it's the problem of the debt itself.3 a8 A( P9 Z' v, H, H+ \
the debt(securities) is bad, faulty, that harmed the whole system.