Kev

i thought it is the reason of rate of return.
& u( n, x1 o  R+ Q3 J; t! K, o0 MCDs could have different ratings, AAA -> F,
' f3 `  Z5 E* a8 cmore risky ones would have higher premium (interest rate) as a compensation for an investment.: ]* m* i2 `8 d8 |7 x) m* l
main reason why ppl buy those risky CDs is because the rate of return exceeds their internal rate of return,/ ?/ \5 Q7 K; w  j
in other words, the interest rate of that investment > their required interest rate, therefore they invest in those securities.
$ I! _  P& @5 V7 ^) J" i% {3 WAlso, fund managers would include risky assets in their portfolio for different purposes, eg efficiency.4 I* L: i$ U) N
similar to bonds, CDs trading in the secondary market have different value at different times,
. W7 G! K8 z: ^# Ynormally the value is calculated by adding it's principle and interest. ( k3 V, C! X2 m% `- n, A0 B% O
eg. the value of the mortgage+the interests to be recieved in the future. ( v8 H0 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.
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% I* m1 w$ }4 B6 Q% U. Qim not quite sure if the multiplier effect does really matter in this case.: V% v$ r% Q; `+ W1 x: X
in stock market, it's the demand and supply pushing the price up/downwards.8 B" w. @/ N5 K9 T& q% J
For eg, A bought 10000 shares @10$ ; B sells 20000 shares to C @ $12,
$ |  ~; G1 b8 \& OA's shares would suddenly increase to $120000 from $100000 which does not invlove any $ transaction.
0 L% q) W7 ?% o( z0 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. : n  k# d0 M! b7 f' \& g3 ~
but the value of their assets did really drop significantly.
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% i7 a6 I2 t& P5 K, y) z8 N5 c- ~[ 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 ?. l. m+ w& D. Z
Refer to last example,
& C) m0 l, R( X! O7 V6 e- Z, \. Vthat means bank A have no money because we borrow 10 dollars from bank A
; N4 ~) L' X+ E! N) FBecause bank A doesnt have enough cash on hand
6 @" e& t8 ?5 C* }4 O! Ltherefore bank A need to be bankrrupt ??? Am I right ?? ...

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, X. R- B  D5 Q, _7 h+ U$ i: MA->B->C->D->E
0 ?; @! `. Z- K  f7 P" _* x0 C; A! |4 ]so does it mean if E failed to pay D,
1 a' {% K4 [$ F3 n3 n5 Sall 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,
3 c# Z+ \9 S/ F9 }3 Oin this case it doesnt really matter how much money is created, " R7 M& D1 S7 |) e3 U; e
it's the problem of the debt itself.2 A. ]& }) l) F
the debt(securities) is bad, faulty, that harmed the whole system.