Kev

i thought it is the reason of rate of return." U* [/ j, d/ h9 U5 {
CDs could have different ratings, AAA -> F,
' z5 z; I8 n! d. b, h" cmore risky ones would have higher premium (interest rate) as a compensation for an investment.
, w  ?; g6 t4 Y; T9 ?6 x6 ?* Omain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
& G# m. B* r4 R5 kin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.5 m6 x+ a# B; B
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
; p" S2 ?! k+ e; n/ `- _4 Lsimilar to bonds, CDs trading in the secondary market have different value at different times,
; i( i+ x* `- Z. Unormally the value is calculated by adding it's principle and interest. % k/ v% \- }2 K& V3 ^' u; S. Q
eg. the value of the mortgage+the interests to be recieved in the future. 0 A4 Y* q4 D1 w" D0 P% l+ S8 b5 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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: _% K3 T8 |" |4 wim not quite sure if the multiplier effect does really matter in this case., e/ g4 g$ _/ ]# t
in stock market, it's the demand and supply pushing the price up/downwards.
3 {3 C$ V# C( p0 J2 K( X, ZFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,, v% ?  |  z7 y5 {
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.$ e) u* L6 o, N1 M- W+ p- ~9 A" ?7 J
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.
8 @5 v' Y0 ^) F# T' o  kbut the value of their assets did really drop significantly.9 ~' O  ~0 u. r( ^" L, o
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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
% N' z; U# s' ]1 J- VRefer to last example,& ]# v& g" C' _3 y% M4 m
that means bank A have no money because we borrow 10 dollars from bank A
9 o- p4 ~: A1 S  m/ k" @6 zBecause bank A doesnt have enough cash on hand
: q' u- _3 @( }) l* otherefore bank A need to be bankrrupt ??? Am I right ?? ...

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' P- Y7 l, A# Z. U& QA->B->C->D->E
2 s3 M. L* C$ h4 W3 uso does it mean if E failed to pay D,
8 G+ U! n% n* k& F& Mall the B,C,D,E have to go bankrupt?# u- G* W( {2 w' T0 _4 O, i+ T' V

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the multiplier just tell how much money created in a whole economy,
" B  U0 u0 V9 P; O1 U, N8 Oin this case it doesnt really matter how much money is created,
1 Z" s0 h! a, V8 d/ Z* Kit's the problem of the debt itself.3 i7 H$ g+ y* [
the debt(securities) is bad, faulty, that harmed the whole system.