Kev

i thought it is the reason of rate of return." k2 X, m" H3 \: ?. r- c
CDs could have different ratings, AAA -> F,! M  z% ~* S9 s3 J( k- c9 F
more risky ones would have higher premium (interest rate) as a compensation for an investment.9 T  q+ j* j. U0 H2 V' m5 V
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
$ U7 F! a" M# \- Rin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.5 m5 T/ u8 t. @7 m) T
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
: Q* w6 D" E9 c' Csimilar to bonds, CDs trading in the secondary market have different value at different times,
7 W+ F, [- N! }+ e* p, B( t5 pnormally the value is calculated by adding it's principle and interest.
# z9 z3 J1 P1 D! ^eg. the value of the mortgage+the interests to be recieved in the future.   n2 ~# X7 H" x' l8 d7 p
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.
, @8 g1 e- _! [+ Pin stock market, it's the demand and supply pushing the price up/downwards.& m4 S% F3 [8 C
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
8 j8 r- p; q( Z$ ~8 @/ r2 VA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.- q& F8 _, m; K( o( P$ t6 q
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.
% s$ G, r3 [( {+ R5 P( P; l" jbut the value of their assets did really drop significantly.
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2 k) Z3 a" D; e[ 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
& [% q% D5 e) ?1 j5 XRefer to last example,9 ?$ G+ k6 L& f% s  A9 T
that means bank A have no money because we borrow 10 dollars from bank A + x! j3 p! Q! m$ ]3 g0 d( k- ^3 F7 ~
Because bank A doesnt have enough cash on hand
- I, o+ X. `& }& ]2 F, vtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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, j# i+ V7 O5 `$ A3 L- XA->B->C->D->E
( N- q: B. T2 Rso does it mean if E failed to pay D,
$ ?9 U6 @. q: A( |6 call 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, ! P+ A1 T1 J& ~; }
in this case it doesnt really matter how much money is created,
- j. O/ @/ ]$ d, m" r2 [* }2 U) Lit's the problem of the debt itself.
, P$ @1 o! q! B% l4 Jthe debt(securities) is bad, faulty, that harmed the whole system.