Kev

i thought it is the reason of rate of return.7 n5 S6 P1 J* R: K
CDs could have different ratings, AAA -> F,
' Q# M, J. F9 \2 c' i, ?8 q. fmore risky ones would have higher premium (interest rate) as a compensation for an investment.
3 `7 w3 `6 k6 s/ e- z' ?$ ~( ^$ Jmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,+ J( s4 c3 F- p( s
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.' O" g$ m* x. s5 O  }, b
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.  C6 f& |# v& M
similar to bonds, CDs trading in the secondary market have different value at different times,) |% P+ s$ E$ b( @9 f1 s) Z8 _  h$ n
normally the value is calculated by adding it's principle and interest. + b  L' l' t( j1 K6 E) j& \, A) u
eg. the value of the mortgage+the interests to be recieved in the future. - W5 k5 ]/ E4 O* n' e
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.5 @5 j, r, F# o1 H
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im not quite sure if the multiplier effect does really matter in this case.
; m: O! `1 ?8 Z+ zin stock market, it's the demand and supply pushing the price up/downwards.
/ f3 w4 p  X! s+ E( \/ ]( SFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,9 J' m, G! t0 v; J6 v( h- g
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.2 t8 I3 d1 D) S+ p: S' u
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.
+ M4 F  E7 e: g9 |5 s& Rbut the value of their assets did really drop significantly.9 k+ L) J. H0 M/ [, ^+ S. A. U
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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& T9 b" R6 L4 g7 ?& @  D, ]
Refer to last example,
7 u/ [% |3 |" Gthat means bank A have no money because we borrow 10 dollars from bank A
/ C) I, E; E- x! ?# `Because bank A doesnt have enough cash on hand
; C) j; R7 G$ `" F% r' O, r! gtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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1 [7 N/ b- I# q% D  A8 kA->B->C->D->E: z/ L0 i7 |# _. F& e/ X: A3 s/ L2 U
so does it mean if E failed to pay D,
' Z9 ]7 ?9 |: G3 M  V+ p/ w) \all the B,C,D,E have to go bankrupt?1 O  g8 J& I6 h0 i" o# n9 m
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, [5 d3 v+ m5 n. X6 m. U$ d( Y/ Mthe multiplier just tell how much money created in a whole economy, / M4 ]4 H! Q$ {' C* r" s
in this case it doesnt really matter how much money is created,
% S- r6 u4 A7 q7 [it's the problem of the debt itself.& j+ k$ C& B- T3 i
the debt(securities) is bad, faulty, that harmed the whole system.