Kev

i thought it is the reason of rate of return.
0 H  q  ~, z, t/ eCDs could have different ratings, AAA -> F,
' _+ i! J; w  Z6 ]* H  Cmore risky ones would have higher premium (interest rate) as a compensation for an investment.. E8 z0 G, ?3 @3 p
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
% _$ i9 q2 D+ ]) kin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.1 m2 m* J3 j1 P9 g7 p" R
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
  ~7 C- G* [+ G# Z; y! {& K) qsimilar to bonds, CDs trading in the secondary market have different value at different times,
6 W* ?( f$ F7 P9 Y9 @( r0 enormally the value is calculated by adding it's principle and interest. " U% W4 L; ]; k5 a8 P+ L9 g# U
eg. the value of the mortgage+the interests to be recieved in the future. $ m' d& H( |$ E# a* h. j5 r0 Y7 D* N
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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im not quite sure if the multiplier effect does really matter in this case.
2 N1 \9 n8 p6 m) ?0 L% ~in stock market, it's the demand and supply pushing the price up/downwards.* Q. e$ F# e) v& Z. B" t
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
* V) @1 @2 c. n2 f( |) W9 WA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
6 z! }9 t8 M( @  d! XThe 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.
$ f, C( X  C2 Nbut the value of their assets did really drop significantly.8 m! {9 }6 L5 G, r; f% ~, p
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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) s6 J1 w5 s, P$ _8 k
Refer to last example,
) t( H+ r9 Z9 ?+ d% F/ L0 ]6 {that means bank A have no money because we borrow 10 dollars from bank A
. A: k( Z" D: ]' T% m7 `! K, ~Because bank A doesnt have enough cash on hand
; D- P/ i4 J1 itherefore bank A need to be bankrrupt ??? Am I right ?? ...

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; l8 T; ]* V+ l5 T& ?4 KA->B->C->D->E
$ N$ s( J% B8 c9 `- jso does it mean if E failed to pay D, : z4 }" b% j& Y2 F1 i
all the B,C,D,E have to go bankrupt?7 E9 i/ G  p  w: w& L4 z' M' p

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, o9 s1 m- |) w1 Y7 Pthe multiplier just tell how much money created in a whole economy, : M# b$ `4 C7 j: `+ A& C& o
in this case it doesnt really matter how much money is created,
$ F6 M" y% ^5 {7 ?% Y! m5 hit's the problem of the debt itself./ e! f* k* Q, u0 T0 ?2 _
the debt(securities) is bad, faulty, that harmed the whole system.