Kev

i thought it is the reason of rate of return.0 M2 `" g: A4 ^) m/ n
CDs could have different ratings, AAA -> F,
) a. d9 ~, H7 B) H' t( Cmore risky ones would have higher premium (interest rate) as a compensation for an investment.
& Z* X" ?: F: Y5 K: L% |' @7 bmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,- b# n) H( E, E& Y' r
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
+ O2 t; c  f+ Y! F  tAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
( c& i$ p0 b  nsimilar to bonds, CDs trading in the secondary market have different value at different times,
( F4 @5 V, n( Z: |! R- l9 I+ Unormally the value is calculated by adding it's principle and interest. 0 M6 a) D# l3 u2 y1 Q6 ^" X" g
eg. the value of the mortgage+the interests to be recieved in the future. ) u9 [$ i. t% [7 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.
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im not quite sure if the multiplier effect does really matter in this case.
* g: F  e3 ?4 Y$ @4 K7 Z+ Pin stock market, it's the demand and supply pushing the price up/downwards.( l  s: q% e# l6 b5 H
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,) }. G# c1 m, ~/ v: O2 f( R
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
* o/ U$ w) b* ZThe 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. $ f8 F1 ~- s* j8 ~: Z0 L: q
but the value of their assets did really drop significantly.
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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
- y- _# c6 O* |: L+ {4 l- C8 I- vRefer to last example,% ?  G4 j1 Q" u& \6 f1 [
that means bank A have no money because we borrow 10 dollars from bank A
- M& @* ^5 D( t) _- j6 z& sBecause bank A doesnt have enough cash on hand . \2 x& Q9 e- o
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E
4 B3 d9 K8 Y% Yso does it mean if E failed to pay D,
0 |, F- Z2 H7 I$ |8 j; Lall the B,C,D,E have to go bankrupt?- q" A" E& M: x5 s: m9 |$ L

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/ }4 C, M0 Q% A' jthe multiplier just tell how much money created in a whole economy, / [" X/ a7 \, M" J7 Z: B9 `
in this case it doesnt really matter how much money is created, - b. m* n0 @' E% B, l0 e0 E+ H
it's the problem of the debt itself.& a" y3 O' @" G" J2 g3 `' w6 [
the debt(securities) is bad, faulty, that harmed the whole system.