Kev

i thought it is the reason of rate of return.- _4 D* {& Y( Z& {! L" y& x
CDs could have different ratings, AAA -> F,
3 C3 h! ^4 X% i+ E$ d$ h/ F  Umore risky ones would have higher premium (interest rate) as a compensation for an investment.
/ a# G& v+ d! A3 Mmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,9 }: z5 N! f: q. b3 H, k2 Q
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.! e- S' W8 M0 n0 E
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.* e; u3 X+ K/ S/ p9 x$ n5 M  z- |! Z
similar to bonds, CDs trading in the secondary market have different value at different times,
- C/ Z' Z5 {' U! `  b4 snormally the value is calculated by adding it's principle and interest.
2 m) ?* ]( B; ~" c( Eeg. the value of the mortgage+the interests to be recieved in the future.
! H4 m% A' |: r* cbanks 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./ o% W) Y. _7 K1 u" z
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im not quite sure if the multiplier effect does really matter in this case.& N( v, _% L; E& C# W+ F+ `; {
in stock market, it's the demand and supply pushing the price up/downwards.8 Z% q5 n. I: A3 ]) y
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,. c* t  v  \: F; @
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.) w% k+ t' T0 \3 w5 J- Q! v) _
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. . E6 u1 C+ H  p" V. f0 Q
but the value of their assets did really drop significantly.
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1 V. ]! g3 Y3 V# _[ 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
7 D* S5 w; y- b5 f0 d" \3 Q; ~Refer to last example,
4 l) ?) d. L; ^6 L+ ]that means bank A have no money because we borrow 10 dollars from bank A
" @" |  H: m: D# [3 PBecause bank A doesnt have enough cash on hand
$ P, Y/ X- g8 w; N: ?# P* jtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E
: G! `8 Q- s& _, uso does it mean if E failed to pay D,
2 U# ?2 x* ~. eall the B,C,D,E have to go bankrupt?
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( Q2 y) O/ G- J/ D! nthe multiplier just tell how much money created in a whole economy,
4 A3 w! S1 P0 |1 u+ Ain this case it doesnt really matter how much money is created,
. {% ^) u0 B  i; o5 J. ?) U; Dit's the problem of the debt itself.
1 ?0 f2 H9 g% o- |9 f+ t! |- Xthe debt(securities) is bad, faulty, that harmed the whole system.