Kev

i thought it is the reason of rate of return.8 l0 G' X6 C4 [9 N% C. e% j( ~: g
CDs could have different ratings, AAA -> F,& k- b- t. i9 u4 h& s
more risky ones would have higher premium (interest rate) as a compensation for an investment.
/ v4 l: O8 k5 w4 b. |0 |7 imain reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,
+ L" i: _; k$ v8 M; J0 ]) fin other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
. _' ?$ F5 H- \Also, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
! A; Z% G8 f0 A6 osimilar to bonds, CDs trading in the secondary market have different value at different times,/ B- F' V) u4 y1 C% s% u2 I* x0 w
normally the value is calculated by adding it's principle and interest.
( t0 C0 V& F5 v0 N0 ?$ B, geg. the value of the mortgage+the interests to be recieved in the future. * i4 y3 O: e' Z1 V3 h
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.7 W; T' X$ ~* K6 U1 @
8 S# W, y+ d8 l% E* f+ }% h
im not quite sure if the multiplier effect does really matter in this case.4 l+ q+ y; ]6 w3 g% t+ h5 l7 @! P
in stock market, it's the demand and supply pushing the price up/downwards.* N; P& f4 p$ H
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,$ v4 g  C* E' Q* R; \; b
A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.- I9 W( a+ G) r% C2 S
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. " @" h! u% E( m: s" Z& K
but the value of their assets did really drop significantly.1 O/ H2 c! Q8 u
% a: {* n9 ~' \& X
[ 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
2 s6 z) }% x9 Q' Z; t1 MRefer to last example,+ E* X% d2 ~6 c4 d8 h
that means bank A have no money because we borrow 10 dollars from bank A ( t* N$ |: \1 |
Because bank A doesnt have enough cash on hand * u9 U4 P8 {0 h9 g
therefore bank A need to be bankrrupt ??? Am I right ?? ...

2 ?7 A! ~- U( i9 h$ w9 k9 l
% r4 s2 A; {9 I& f# P
% o, j# Y! Y) |  O
A->B->C->D->E! D' v# @: Q$ d: S0 Q7 q
so does it mean if E failed to pay D,
- l7 g, w0 E$ n8 R3 K+ \- E" \- V# sall the B,C,D,E have to go bankrupt?' f1 `, Y5 W; C  }: d& @6 C- k
3 n2 Z* i& ~" G. L0 w
$ k/ y7 c' D) l% Z5 R. U' A
the multiplier just tell how much money created in a whole economy,
# ]1 g" w/ R2 A3 a- w+ c0 }# o9 gin this case it doesnt really matter how much money is created, . u( F- k8 K1 J8 ^; E7 |
it's the problem of the debt itself.4 E& }7 ?" t2 n; F) U; c2 {
the debt(securities) is bad, faulty, that harmed the whole system.