Kev

i thought it is the reason of rate of return.+ c5 c# g* s+ I$ ^8 L  c
CDs could have different ratings, AAA -> F,
5 j% j: _# q; U( \8 {5 hmore risky ones would have higher premium (interest rate) as a compensation for an investment.7 i3 ~$ x" l  D( o+ g7 Q7 s
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,: u& C5 l* y# M" i$ @
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
! X7 ]: k& T5 v0 uAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.
# t# A7 x. Y4 k8 Rsimilar to bonds, CDs trading in the secondary market have different value at different times,
' A) q/ ]) X0 d/ z& {normally the value is calculated by adding it's principle and interest. ( T9 l" h9 g4 A* F
eg. the value of the mortgage+the interests to be recieved in the future. # @$ }5 e& T7 X4 `5 e; [' J
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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/ Q& P) E8 Z- t4 b8 u; Bim not quite sure if the multiplier effect does really matter in this case.
) W. q5 y# B! cin stock market, it's the demand and supply pushing the price up/downwards.0 k! y% O  B8 B: t
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
3 ^0 p1 z1 l; ]A's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
: `2 @5 [- H2 [+ S; v& `6 {! |4 ?" `1 k- uThe 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. + u/ l. T# Z' L& F
but the value of their assets did really drop significantly.
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1 t& p) P& I. b, I[ 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
8 h) t& C; v; g4 t/ F9 W( A6 oRefer to last example,
! a( y& a3 ?6 kthat means bank A have no money because we borrow 10 dollars from bank A
) W, t' a9 X& F" Y+ }* ZBecause bank A doesnt have enough cash on hand
7 f# p) O0 j4 q  F5 q: n2 F9 T; O( Xtherefore bank A need to be bankrrupt ??? Am I right ?? ...

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5 B! j: r7 M* ~- P2 WA->B->C->D->E; E1 l  ?" [4 ]- w0 U2 t
so does it mean if E failed to pay D, ( p& h  R  Y% O/ C
all the B,C,D,E have to go bankrupt?
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4 T: J: `+ e7 z) e- w! Ithe multiplier just tell how much money created in a whole economy,
' j8 H! j% Y8 m  X- h6 }8 e" Nin this case it doesnt really matter how much money is created, / m3 [3 l! Z! L0 F  d* U- [: F
it's the problem of the debt itself.) p& |+ L# v7 y% \: ?# V
the debt(securities) is bad, faulty, that harmed the whole system.