Kev

i thought it is the reason of rate of return.3 X8 S* z8 g! r5 {" o! ]
CDs could have different ratings, AAA -> F,/ D9 K% t3 e- Y) N+ G# z
more risky ones would have higher premium (interest rate) as a compensation for an investment.
) ]. t" h" P  f  g9 ~& _main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,: X; F; p  s* N; w0 X
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
# }- Z4 [7 c, {2 N- Y, Y2 sAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
5 v" G" a8 f4 Q9 {' K/ @7 w. ?similar to bonds, CDs trading in the secondary market have different value at different times,
& H  }) M2 {9 a& pnormally the value is calculated by adding it's principle and interest.
9 r& i! V* T- g$ a2 c/ ueg. the value of the mortgage+the interests to be recieved in the future. 8 a8 K! c$ c1 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.
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im not quite sure if the multiplier effect does really matter in this case.
6 H8 S! o- T9 T1 Z: |in stock market, it's the demand and supply pushing the price up/downwards.# e" e: O, \' C1 g2 I
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
+ ^0 r3 }* y7 y* q7 y6 }5 \) NA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.2 @5 e9 Y/ p4 K1 Q7 @
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/ Y9 Z$ Z3 I- H  \/ t+ Q# w
but the value of their assets did really drop significantly.
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8 i7 u; N9 z- j( v1 ?: n4 k[ 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
9 _8 k1 D& B0 Y' r( ?: }/ hRefer to last example,
# \; F+ h: c$ ~* r& }) m3 w- l6 q: Uthat means bank A have no money because we borrow 10 dollars from bank A
3 r1 n  ^, P4 BBecause bank A doesnt have enough cash on hand + x3 A+ H  n, T8 D* @
therefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E9 h. ~8 Z* [" B) `: D  ]7 z* s
so does it mean if E failed to pay D,
7 Z9 c9 V; O* lall the B,C,D,E have to go bankrupt?( Q& l! V/ K% a% N! z
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" X; z( G4 x3 x  Z' Pthe multiplier just tell how much money created in a whole economy,
* i/ C$ |! I$ l7 p, nin this case it doesnt really matter how much money is created, , x# }/ ?" T7 C5 \' w- l3 }
it's the problem of the debt itself.. N5 c9 \7 {0 P, K
the debt(securities) is bad, faulty, that harmed the whole system.