Kev

i thought it is the reason of rate of return.
) L! n" z1 A9 B4 q' i; y5 DCDs could have different ratings, AAA -> F,
, K% J1 }) z' p0 F! @! tmore risky ones would have higher premium (interest rate) as a compensation for an investment.8 E$ N9 F# y$ P
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,2 i5 {$ T* G  a, f
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
2 ~0 n& k0 V' Z* w8 k0 K9 OAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.- o& k& l. ^* ^8 n
similar to bonds, CDs trading in the secondary market have different value at different times,! k. {8 q# |( k& d  D
normally the value is calculated by adding it's principle and interest.
( T7 f* r/ L& X9 T3 D8 Meg. the value of the mortgage+the interests to be recieved in the future.   J# `* E* S0 y3 x" ^
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.' t9 \: z; s/ c
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im not quite sure if the multiplier effect does really matter in this case.
) t% c9 w$ F% E) Z* x4 V  D. E$ Vin stock market, it's the demand and supply pushing the price up/downwards.
3 f( P7 A0 ?( w! E& l- F3 f3 `For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
5 ?) w' G) p9 M0 ZA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
, T& c. ^5 `/ F+ M/ g6 I5 F' x) G+ tThe 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. - N) D" w- V7 d7 K; o2 c
but the value of their assets did really drop significantly.$ p7 [3 O( i, p# ~

% `% F- |9 {0 e8 L0 e1 V, N" o[ 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
0 N/ k! H/ l8 `! A/ GRefer to last example,# i- \7 l( V8 [) T( Q0 G
that means bank A have no money because we borrow 10 dollars from bank A
) G" ~( |9 @9 `1 \" `4 D% J& C4 @  PBecause bank A doesnt have enough cash on hand
9 s( o5 E- `0 U& P8 ctherefore bank A need to be bankrrupt ??? Am I right ?? ...

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% t! o$ x4 U4 D2 ]A->B->C->D->E
% x& v  {- q- g0 O- [5 Fso does it mean if E failed to pay D, . z8 R# ~( `" S( ~2 P. z6 C, X
all the B,C,D,E have to go bankrupt?7 k5 S; X5 s% f$ f9 ~0 X
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& m; R( N3 @8 r) L7 u5 Dthe multiplier just tell how much money created in a whole economy,
6 o: U& S# s: Y$ qin this case it doesnt really matter how much money is created,
, d1 Q, v% B  C) I8 l0 C4 V7 lit's the problem of the debt itself.+ f! P! _, ~* Y9 O
the debt(securities) is bad, faulty, that harmed the whole system.