Kev

i thought it is the reason of rate of return.; m# l, f! l5 g3 z$ I9 j
CDs could have different ratings, AAA -> F,
  d$ v+ q: }: x" l8 H/ Rmore risky ones would have higher premium (interest rate) as a compensation for an investment.
; P2 x: W$ g3 A" h" jmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
! E4 [9 q, m! b8 f  Kin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
5 R- }% K9 A! ?, Y/ yAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
# |7 c' t; O/ t- F! U2 vsimilar to bonds, CDs trading in the secondary market have different value at different times,
% \, H! L. U% }0 }+ Mnormally the value is calculated by adding it's principle and interest. & Y/ _- x- Y% P% x
eg. the value of the mortgage+the interests to be recieved in the future.
4 z! U9 V8 Y" J- F8 h) x' zbanks 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.8 R! I, j; F3 M# T' E

3 C/ l" O& I# ~im not quite sure if the multiplier effect does really matter in this case.; _3 S7 S6 i4 Z
in stock market, it's the demand and supply pushing the price up/downwards.
* S5 ^0 g3 s$ }  x" gFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,3 c$ Z! J- K2 k2 ?3 g
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
$ k( X7 F& l) C' u1 b6 X, D: @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.
# z# o7 ?  W' q/ t" fbut 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.gif4 p8 g3 t6 Z+ ^$ C7 m! x6 b( ?4 d
Refer to last example,
( ?- B8 o: x' |  ]7 ^that means bank A have no money because we borrow 10 dollars from bank A 1 ^+ d/ _# p1 T9 s3 o9 P
Because bank A doesnt have enough cash on hand
5 N, i* Y% o' `therefore bank A need to be bankrrupt ??? Am I right ?? ...

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A->B->C->D->E5 p0 H1 w- N; l& b5 j! ]* R
so does it mean if E failed to pay D,
$ r1 V0 E3 n( L& Zall the B,C,D,E have to go bankrupt?
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+ b3 L9 F$ w3 _, N5 a; ]# Nthe multiplier just tell how much money created in a whole economy,
% t( ~2 R$ K# K& _5 n6 u& rin this case it doesnt really matter how much money is created, , [2 o  s" c7 L) \5 o
it's the problem of the debt itself.
, g: t) h% A. h5 Z* zthe debt(securities) is bad, faulty, that harmed the whole system.