Kev

i thought it is the reason of rate of return.4 k+ Z* P- @6 s
CDs could have different ratings, AAA -> F,
+ B( a9 T, ?% F4 H( ~0 s3 U0 U! t6 Rmore risky ones would have higher premium (interest rate) as a compensation for an investment.: e* H4 W% l* _' U, ]
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
. e( a7 d3 Y( w! din other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.: C) @, s; W/ i
Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.& M/ Y& B1 B* \1 I' Q& r7 E0 z# H* W! C4 \
similar to bonds, CDs trading in the secondary market have different value at different times,& \1 M7 q4 O8 d- ~& k6 [5 a) x
normally the value is calculated by adding it's principle and interest. : l6 j4 \! Q6 W
eg. the value of the mortgage+the interests to be recieved in the future.
  ^4 `( l, C- I/ M6 Q4 \& |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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, ?/ j) B& {6 {  W& w# [5 l1 {im not quite sure if the multiplier effect does really matter in this case.
5 ^# {  a$ S# R5 ~- r- nin stock market, it's the demand and supply pushing the price up/downwards.
7 i8 ^' h9 `$ ]+ fFor eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,  C' L# a  c+ y$ }) ]1 m5 C4 `
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.6 E, r- d% p1 @. n9 e$ u
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. : U4 A/ `% q/ o/ ~% r! p$ T% i
but the value of their assets did really drop significantly.8 T' H9 ~1 S, \" z9 p2 ]+ g8 n

" j1 ?$ ^+ f2 t6 R4 T  p' G[ 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.gif9 u, A+ [$ C+ U% l
Refer to last example,. `! K% f6 D- K
that means bank A have no money because we borrow 10 dollars from bank A + O! T5 Q3 S1 X  k, s+ Q: b* M3 `
Because bank A doesnt have enough cash on hand
3 e- `3 p( \  @" h+ F, T3 Qtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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4 g+ ^; a; q3 }8 uA->B->C->D->E
. f  n5 e4 c3 Y4 Q1 Z6 a0 nso does it mean if E failed to pay D,
) J" q$ p  x5 I, I/ Z) a" Fall 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,
8 x+ Z" g) k3 Z  S* bin this case it doesnt really matter how much money is created,
* D# a8 r% l' `3 \3 s' Y1 Dit's the problem of the debt itself.8 ~7 |. G3 ]% x# [; D
the debt(securities) is bad, faulty, that harmed the whole system.