Example. What is the face of a New York draft on Liverpool, which costs $7297.50, when exchange is quoted at 4.861? Find the face of each of the following drafts: A company, or corporation, is a number of persons associated under a state law for the purpose of transacting business. The modern company, or corporation, has supplanted to a great degree the old-time partnership. Nowadays business is conducted on so extensive a scale that a company often numbers several thousand persons. The money which a company invests in business is called its capital, or stock. The stock of a company is usually divided into shares of $10, $50, or $100 each. The face value of a share in most large companies is $100. These shares, as a rule, can be bought and sold. The buying and selling is usually done by agents called stockbrokers. The usual fee of a stockbroker is at the rate of % of the par value for buying a share and % of the par value for selling. A broker's fee is called brokerage. If the business of a company is prosperous, a share may sell for more than its face value. The stock is then said to be at a premium. If the business is not prosperous, the value of a share in the market is likely to be less than its face value. The stock is then said to be at a discount. When a share sells in the market for its face value, it is said to be at par. A quotation "10 % premium" means the same as 110 % of the face value. A quotation "10% discount" means the same as 90 % of the face value. The profits of a company, usually distributed to stockholders annually or semi-annually, are called dividends. The dividend is generally so many dollars on a share, or a percentage of the face value of the stock. Thus, "4% dividend" means $4 on a share whose face value is $100. Stock is of two kinds, common and preferred. The preferred is given certain privileges by the charter of the corporation, of which privileges the most common is that of a fixed dividend. When the company does not earn` enough to pay this dividend on the preferred stock, the dividend accumulates, and must be paid, together with succeeding overdue dividends, before any dividend is paid on the common stock. What is left of the earnings of the company, after expenses are paid and the dividend on the preferred stock, becomes a dividend on the common stock. Thus the common stock is not as sure of a dividend as the T preferred; but the dividend on the preferred stock is fixed in amount, while the dividend on the common stock is only limited by the earnings. BONDS When a city, state, or nation, or a corporation, wishes to borrow a large amount of money, it usually does this by issuing bonds. These bonds are very similar to the promissory notes given by individuals. They are promises to pay to the owner of the bond the amount specified in the bond after a specified number of years, and to pay interest at specified intervals at a rate named. Bonds are usually issued in $1000 or $5000 denominations, and are usually protected by a mortgage held by a trust company. In case the bonds are not paid, the property included in the mortgage can be sold for the benefit of the bondholders. Bonds are of two kinds, registered and coupon. A registered bond is one which is recorded by number and by name of the owner, and it is not transferable except in writing and at the office of the treasurer. Coupon bonds are so called because they have interest slips attached to them, which are cut off as the interest falls due. interest slips are payable to the bearer. These The following is quoted from a daily newspaper giving the New York stock market. U. S. new 4s registered, 135 U. S. old 4s registered, 103 U. S. new 4s coupon, 136 Baltimore & Ohio 4s, 1021 1091 Chicago B. & Q. new 4s, 931 Notice that in stock quotations the fractions used are halves, quarters, eighths. Notice further that the variations in the prices of stock in the course of a day are considerable. There are instances where stocks have fallen in one day 50% of their face value. Why the prices vary so much would take the proverbial Philadelphia lawyer to explain. In the above quotations the first column shows the number of shares sold; the second column gives the highest prices paid for the shares; the third gives the lowest prices paid; and the fourth gives the closing bids. In the course of the day above referred to there were several other prices than those given. Example. Find the cost of 10 shares of stock at 1071. SOLUTION Market price Cost of 1 share = $107ğ (i.e. $1071 + $}). Cost of 10 shares = $1075 x 10 = $1076.25. EXERCISE 139 1. Give the premium or discount of each of the stocks quoted (pages 274 and 275). 2. What is the cost of 20 shares of Atchison at 807? at 81? 3. What is the cost of 40 shares of Baltimore & Ohio at 927 ? 4. What is the cost of 200 shares of Canadian Pacific at 1451 ? 5. What is the cost of 25 shares of stock at 1181 ? 6. Find the cost of 50 shares of Missouri Pacific at 106§. 7. Find the cost of 100 shares of each of the stocks quoted (page 274), at the prices indicated in the fourth column. Example. 1. What sum should be received from the sale of 40 shares of Pennsylvania at 144}? SOLUTION Market value of 1 share of stock = $144}. Brokerage $ }. = Sum received from 1 share = $144. Sum received from 40 shares $144 x 40 = $5760. = Example 2. What profit is made by purchasing 50 shares of stock at 1424 and selling them at $144 ? SOLUTION. Cost of 1 share = $1421 + $ } = $1423. |