EXERCISES

Allow for no brokerage in the first seven problems.

1. Using the table, find the price at which 20-yr. bonds can be bought to yield as follows:

5% bond to yield 41%.

6% bond to yield 5.4%.

41% bond to yield 5.3%.

2. Find the rate of income on 20-yr. bonds bought as follows:

6% bonds bought at 114.27.
31% bonds bought at par.

5% bonds bought at 80.95.

3. A man invested in first-mortgage industrial bonds bearing 5% at a price which yielded him 4.80%. What was the quoted price?

(In this problem, and in those to follow, consider all bonds as maturing in 20 yr.; interest coupons as due Jan. 1 and July 1.)

4. An issue of $15000 of 5% bonds is sold for $14,449.50. What rate do they pay the purchaser?

5. On June 12, I purchased five $1000 31% bonds quoted at 82 and interest. How much do I pay for them?

SUGGESTION. Compute the accrued interest from the time of the last payment, and add to the quoted price.

6. If I buy a $1000 7% bond at 102.8 + $27.50 accrued interest, what is the rate of income on my investment?

7. A Paris, France, municipal loan of $41,000,000 3% bonds was oversubscribed 70 times, that is, the subscription amounted to $2,870,000,000. If the bonds were allotted pro rata according to subscriptions, what amount was awarded to the man who subscribed for $130,000 worth?

8. A man having $7000 to invest wishes to secure an income of 45% on a 4% bond. How many $1000 bonds. can he buy, and how much will he have left of his $7000?

NOTE. The broker's charge for the purchase or sale of a bond is the same as for stocks; viz., of 1%, or $1.25 for each $1000 bond.

Fill in the blank spaces in the following. Notice that under "quantity" the par value of the purchase is given instead of the number of bonds.

14. A man deposits $25000 with his broker for the purchase of Northern Pacific 4's at 981, brokerage %. How many bonds will be purchased for him, and what cash balance will he have left with the broker?

15. Cole & Co., brokers, sent this statement to R. T. Allen: "We have this day bought for your account and risk as per instructions and in accordance with the rules and customs of the New York Stock Exchange, through Wilson & Co.:

What is the amount of R. T. Allen's investment? commissions do Cole & Co. get? on the entire investment?

NOTE. The tax, called a transfer on all stock sales. This charge is 2 tax on shares of $25 par value would

What

What is the rate of income

tax, is a charge, paid by the seller, per share of $100 par value; the be 50 per 100 shares.

EXCHANGE

332. Exchange is the term applied to the transfer of money from one place to another otherwise than by actually sending the money itself.

333. Exchange is domestic, if between two places in one country; foreign, if between two places in different countries.

334. There are three important factors in exchange: 1. The amount to be transferred.

2. The charge for such transfer.

3. The value of ready money in one place as compared with that in another.

335. It is not surprising that money may have different values in different places. This value depends on the rate at which it can be borrowed from the banks. If the banks in one community have plenty of money on hand, and there is no great demand for it, money will be "cheap"; i.e., the rate of interest on loans will be low. But if there is no great surplus of cash on hand, and much money is needed for carrying on business, money will be "dear" or "tight"; i.e., the rate will be higher.

336. The value of money in one place as compared with its value in another is called the rate of exchange between these two places.

337. Rates of exchange fluctuate, being governed by trade, or business conditions. Published rates of exchange usually include the cost of the transfer.

338. The principal money centers in the United States are New York, Chicago, and San Francisco, and rates of exchange are usually quoted as "New York exchange," etc. Foreign exchange would be quoted as." London exchange,” “Paris exchange," etc.

DOMESTIC EXCHANGE

339. Money may be transferred by:

(a) Postal money order. The government, through its post offices, accepts money and issues an order therefor, payable at any office the purchaser may desire. Postal money orders are issued for any amount up to $100.

The cost of transfer by postal money order, called a "fee," is determined by the following table:

(b) Express money order. This is similar to a postal order except that it is issued by an express company instead of by the government.

The fee for an express money order is the same as for a postal money order.

(c) Telegraphic money order. Telegraph companies will accept money at any office and pay it out at any other office after an exchange of telegraphic messages.

The cost of such transfer is greater than that of other forms of exchange. The sender must pay for the sending of two ten-word messages, and 1% of the amount transferred. There is no charge less than 25 plus twice the ten-word rate, but on amounts over $1000, only 1% is charged for the excess. (d) Bank check. (See § 253.)

In local transactions involving bank checks there is no charge for collecting.

Collection is usually charged on bank checks sent to any place outside the city in which they are issued or outside the banking zone where they are received. The charges vary according to the amount of the check, the bank's arrangement with the customer, the distance between the two towns, etc.

(e) A certified check is a check across the face of which some officer of the bank, usually the cashier or paying teller, has stamped and signed a statement certifying that the check is good.

(f) Certificates of deposit (see § 252) are issued without charge, but are subject to the usual rates of exchange if cashed at a point other than that at which they are issued.

(g) A bank draft is a check drawn by one bank on another. It is the most common form of exchange because it is safe.