Kev

i thought it is the reason of rate of return.8 T$ H$ P* l; E/ ?* W5 D
CDs could have different ratings, AAA -> F,- [  p6 F  f9 A
more risky ones would have higher premium (interest rate) as a compensation for an investment.2 I8 |: @, F6 f  O9 Y1 Z; E1 D
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,! z* {0 _8 @) g5 D! ]* w
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
6 |7 [' G) a+ _, ^9 QAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
8 m1 V& @; }3 F$ R# `7 b4 Wsimilar to bonds, CDs trading in the secondary market have different value at different times,
& ~9 z; k4 U/ R- z& m) ?4 gnormally the value is calculated by adding it's principle and interest.
; d8 A5 p' g6 B% B! Q# w$ L* s2 R. Oeg. the value of the mortgage+the interests to be recieved in the future. / E5 l5 b5 s1 y7 N, y
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.' E5 H6 p6 E1 s3 x' s# ?5 G* @* r

; v% {9 u* o( i9 R, Yim not quite sure if the multiplier effect does really matter in this case.
9 [$ |1 H( ]) r4 g) d: {in stock market, it's the demand and supply pushing the price up/downwards.
' M  X. g8 W: i4 q' fFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,, D7 Q4 {' N, \3 T& L- m
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.  D, p7 _8 T* ]" o; A
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. + G3 S& N9 L) A; x0 x
but the value of their assets did really drop significantly.1 V# p2 O' r6 {% r* v5 X5 f3 N
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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
. Z  b0 }9 \2 x% I3 i* vRefer to last example,
, W+ K+ |4 X8 D3 l2 P: Lthat means bank A have no money because we borrow 10 dollars from bank A
* }4 \2 e: [# a$ OBecause bank A doesnt have enough cash on hand / D+ e# g2 _# {- c) {4 D
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E( T4 J& ?" b1 V9 c
so does it mean if E failed to pay D,
8 e1 m9 _; x  L  U+ C- Y; g5 B. 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, 2 r# q4 ?1 m( f9 G) |0 a/ g
in this case it doesnt really matter how much money is created,
2 G9 q; u  c, D6 I- {it's the problem of the debt itself.
& ^' ^6 H8 _  ?9 \8 d% q/ q' }the debt(securities) is bad, faulty, that harmed the whole system.