Kev

i thought it is the reason of rate of return.
4 I4 j7 W4 T* l; H9 GCDs could have different ratings, AAA -> F,
/ B$ P# l: a; n* bmore risky ones would have higher premium (interest rate) as a compensation for an investment.
' l" l* }  U; Y! R  ?2 Mmain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
& w& m" F: A9 ?% p9 ~in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
/ \0 x7 p6 M. h9 s' H) KAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
  d" P2 a2 p# C/ K0 |/ Ysimilar to bonds, CDs trading in the secondary market have different value at different times,8 K) I+ x0 U$ p: Q
normally the value is calculated by adding it's principle and interest. 3 `* }! S* \; L& a5 g. m
eg. the value of the mortgage+the interests to be recieved in the future.
0 X! |' J6 T) ~& r9 }8 mbanks 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.0 \0 Q9 l! t* t; P' \
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im not quite sure if the multiplier effect does really matter in this case.5 [8 [$ L% ?6 _1 e
in stock market, it's the demand and supply pushing the price up/downwards.# C/ ^& _2 M: {& G
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
' |# z  s5 O5 ~1 |6 }+ Z* n, dA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction., h) {0 C7 T3 v8 W* T6 Y. |
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.
. ?6 m* m. m) A3 ebut the value of their assets did really drop significantly.( X* q  V$ M( Z+ n

7 ~- o2 h) ?5 \& M% D! W- ~2 b0 y[ 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" q2 w# K! r0 [  W8 a) I9 M0 d4 D7 s
Refer to last example,0 S' B1 l, O# a8 U3 R, U
that means bank A have no money because we borrow 10 dollars from bank A + V$ ~* \5 l, V2 c% W
Because bank A doesnt have enough cash on hand
4 N  `0 _3 ]' u+ w. Y0 Z% @+ Etherefore bank A need to be bankrrupt ??? Am I right ?? ...

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8 B" B/ D; T5 [A->B->C->D->E
  q/ _8 ~6 c+ L9 Fso does it mean if E failed to pay D,
: q: P1 V+ f: w1 ~( rall the B,C,D,E have to go bankrupt?
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% U5 L9 V2 q- nthe multiplier just tell how much money created in a whole economy, - w, p/ Z" _; l7 f# ^
in this case it doesnt really matter how much money is created, ( w& d1 e7 o; ]5 w$ |7 {/ r3 z
it's the problem of the debt itself.) z7 o$ ^% @0 W" x. r
the debt(securities) is bad, faulty, that harmed the whole system.