Ex. 2. A man sells short 100 shares of Canadian Pacific at 131 and three days later "covers" (that is, buys the stock) at 128g. What What is his net profit?

Solution. Each share sold yields 131
Each share is bought for

Therefore the gain on each share is

} = $1307

128 1287
+ =

$2

Therefore the net gain on 100 shares is 100 × $2 = $200.

EXERCISE 71

of

1. The capital stock of a company is $1000000, which is preferred, entitled to a 7% dividend, and the rest common. If $47500 is distributed in dividends, what rate of dividend is paid on the common stock?

2. A person buys 302 shares of stock, par value $10, for $7 a share, paying 5 ct. a share brokerage. 6 mo. later, after having received a 5% dividend, he sells for $9.75 a share. How much does he make, money being worth 6%?

3. If, in Ex. 1, $77500 is distributed in dividends, which is the better stock to own, common or preferred?

4. Which is the better property to own, $1000 stock in a company at 6 %, or one of its $1000 bonds at 4 % ?

5. Which is the safer against loss by theft, a coupon bond, or a registered bond? Which is the more readily

transferred?

6. Why are U.S. 4's registered quoted at 1351, while U.S. 4's coupon are quoted at 136?

7. How much will 50 shares of Amalgamated Copper cost?

8. How much will 75 Atchinson 4's cost?

9. How much will 100 shares of New York Central cost?

10. How much will 100 New York Central 31% bonds cost?

11. Which should you prefer to own, the 100 shares of stocks or the 100 bonds mentioned in Ex. 9 and 10?

12. What is the greatest number of Canadian Pacific shares that can be purchased for $ 5000 ?

13. Which is the better investment, a 4% mortgage or Southern 5's as quoted?

14. Which is the better investment, B and O. 4's or U.S. 5's as quoted?

15. What sum must be invested in Atchison 4's at 1027 to secure an annual income of $4120 ?

16. What rate of income will U.S. 3's registered yield? 17. If I pay $3762.50 for U.S. Steel preferred, how many shares do I buy?

18. How much must I pay for B. and O. 4's to yield an income of 5% on my investment? of 6%?

19. What income will a man receive from an investment of $21625 in U.S. 3's coup. ?

20. What dividend can a company declare on a capital stock of $50000 whose net earnings are $7500?

21. A certain bank pays a semiannual dividend of 31% on its stock; what is the annual dividend on 25 shares?

22. How much must I pay for 5% bonds that the investment may yield 6% income? for 4% bonds? for 3% bonds?

23. A man owns 100 shares of Amalgamated Copper stock. If the company declares a dividend of 5% payable in stock, how much stock will he then own?

24. My broker, after selling for me 200 shares of Wabash preferred, remitted to me $9987.50. At what price did he sell the stock?

25. How much must be invested in U.S. 3's coup. to bring an annual income of $500 ?

26. A bank with a capital stock of $150000, declares a semiannual dividend of 3%. What is the amount of the dividend, and how much will a person receive who owns 25 shares?

27. A gas company declares a 6% dividend and distributes $120000 among its stockholders. What is its

capital stock?

28. A cement company divides $ 80000 among its stockholders. What is the rate of dividend, the capital stock being $1000000? How much is paid to a person who owns 902 shares of $10 each?

29. A broker bought for a customer 500 shares of copper stock, par value $ 25, at a total cost of $18015.63. Find the market quotation and brokerage.

30. A man bought 200 shares of New York Central at 143. The market price declined till it reached 139 and then rallied to 141. Believing that another decline was coming, he sold 500 shares (300 of them short) at 1411. The price continued to rally, however, and he covered by buying 300 shares at 1424. What was the net loss on the whole transaction, making no allowance for interest, but allowing 1% brokerage for each sale and purchase?

INSURANCE

308. There are two general classes of insurance: insurance on the person in the form of life, endowment, accident, and health insurance, and insurance on property in the form of fire, marine, live stock, tornado, plate glass, boiler insurance, insurance against bad debts, etc.

PROPERTY INSURANCE

309. The principal kinds of property insurance are fire insurance, or insurance against loss by fire; marine insurance, or insurance against loss of vessels at sea, or property on board of vessels at sea; tornado insurance, or insurance against loss by storms, etc.

310. The written agreement between the company and the person insured is called the policy, and the sum to be paid by the company in case of loss, the face of the policy. The person insured is called the insured, and the amount paid by the insured to the company for insurance, the premium.

311. The premium is usually computed as a certain per cent of the face of the policy, or as a certain sum on each $100 of insurance. In either case it is called the rate of insurance.

Ex. A house valued at $5000 is insured for of its value at 1.1% per annum. What is the annual premium?

How much would the owner lose if the house were burned

after seven premiums had been paid? How much would the company lose?

Solution. Valuation of house is of $5000 =

$4000.

= 1.1% of $4000 = $44.

= $5000 $4000 + 7 × $44 = $1308.

$4000 - 7 × $44 = $3692.

The above rate of insurance might have been stated as $1.10 on each $100 insured.

EXERCISE 72

1. A house valued at $6000 is insured for of its value at 3% per annum. What is the annual premium? How much does the owner lose if the house is burned after 10 premiums have been paid? How much does the company lose?

2. How much would the owner lose in case the house were damaged by fire to the extent of $1500 after 3 premiums had been paid?

3. How much would the owner lose if the house were damaged by fire to the extent of $350 after 9 premiums had been paid?

4. A residence valued at $3500 is insured for of its full value at % per annum. The company will insure the house for 3 yr. on the payment of 23 times the annual premium in advance. How much will it cost to insure the house for 3 yr.? They will insure for 5 yr. on the payment of 4 times the annual premium in advance. How much will it cost to insure the house for 5 yr.?