CASE II.

262. To find how much stock may be purchased for

a given sum.

1. How many shares of bank stock, at 3 per cent. advance, may be bought for $5150?

OPERATION.

$5150 1.03 = $5000 =

50 shares, Ans.

ANALYSIS. Since the stock

is at 3 per cent. advance, $1 of stock at par will cost $1.03; and if we divide $5150, the

whole sum to be expended, by 1.03, the cost of $1 of stock, the quotient must be the amount of stock purchased. Hence the

RULE. Divide the given sum by the cost of $1 of stock, and the quotient will be the nominal amount of stock purchased. 2. How many shares of railroad stock, at 5 per cent. advance, can be purchased for $6300? Ans. 60 shares. 3. I invested $6187.50, in Ocean Telegraph stock, at 10 per cent. discount; how much stock did I purchase?

Ans. $6875.

4. I sent my agent $53500 to be invested in Illinois Central Railroad stock, which was selling at 7 per cent. advance; what amount did he purchase? Ans. $50000. 5. Sold 50 shares of stock in a Pittsburgh ferry company, at 8 per cent. discount, and received $1150; what is the par value of 1 share? Ans. $25.

STOCK INVESTMENTS.

263. The net earnings of a corporation are usually divided among the stockholders, in semi-annual dividends. The income of capital stock is therefore fluctuating, being dependent upon the condition of business; while the income arising from bonds, whether of government or corporations, is fixed, being a certain rate per cent., annually, of the par value, or face of the bonds.

Case II. is what? Give explanation. Explain difference between income of capital stock, and of bonds.

264. Federal or United States Securities are of two kinds; viz., Bonds and Notes.

Bonds are of two kinds.

First, Those which are payable at a fixed date, and are known and quoted in commercial transactions by the rate of interest they bear, thus: U. S. 6's, that is, United States Bonds bearing 6% interest. *

Second, Those which are payable at a fixed date, but which may be paid at an earlier specified time, as the Government may elect. These are known and quoted in commercial transactions by a combination of the two dates, thus: U. S. 5-20's; or a combination of the rate of interest and the two dates, thus: U. S. 6's 5-20; that is, bonds bearing 6% interest, which are payable in twenty years, but may be paid in five years, if the Government so elect.

When it is necessary, in any transaction, to distinguish from each other different issues which bear the same rate of interest, this is done by adding the year in which they become due, thus: U. S. 5's of '71; U. S. 5's of '74; U. S. 6's 5-20 of '84; U. S. 6's 5-20 of '85.

Notes are of two kinds.

First, Those payable on demand, without interest, known as United States Legal-tender Notes, or, in common language, "Greenbacks."

Second, Notes payable at a specified time, with interest, known as Treasury Notes. Of these there are two kinds,6% Compound-interest Notes, and Notes bearing 7% % interest, the latter known and quoted in commercial transactions as 7.30's.

The nomenclature here explained is that used in com

The character % generally employed in business transactions signifies per cent.; thus 6 % signifies 6 per cent.

What are United States Securities composed of? Explain the different kinds of bonds. Of Notes. In what is the interest on each payable?

mercial transactions, which involve similar Securities of States or Corporations.

The interest on all bonds is payable in gold.

The interest on notes is payable in Legal-tender Notes. When Bonds or Stocks are sold, a revenue stamp must be used equal in value to one cent on each $100, or fraction of $100, of their currency value. If sold by a broker, this is charged to the person for whom they are sold.

The following are the principal United States Securities:

265. To find what income any investment will produce. 1. What income will be obtained by investing $6840 in stock bearing 6%, and purchased at 95 %?

OPERATION.

$6840.95 = $7200, stock purchased. $7200 x .06 = $432, annual income.

ANALYSIS. We

divide the investment, $6840, by the cost of $1, and

obtain $7200, the stock which the investment will purchase (262). And since the stock bears 6 % interest, we have $7200 × .06 = $432, the annual income obtained by the investment. Hence the

RULE. Find how much stock the investment will purchase, and then compute the income at the given rate upon the par value.

What is the value of stamps to be attached to any bond when sold? Name the different kinds of bonds. Of Notes. What is Case I.? Explanation? Rule?

2. If I invest $867 in U. S. 5-20's of '84 at 102 %, what income will I receive on my investment? Ans. $51.

3. What will be my yearly income, if I invest $8428 in U. S. 10-40's, at 98 %? Ans. $430. 4. How much stock at a premium of 43% can be bought for $10500, brokerage %? Ans. $10000. 5. If A. invest $4795 in Maryland 5's at 87 %, brokerAns. $274. age%, what will be his yearly income?

6. Having $10476 to invest, I find I can purchase U. S. 6's at 107 %, and U. S. 5-20's of '82 at 96%, brokerage %, in each instance. How much more will I receive yearly by inAns. $42. vesting in the former than in the latter?

7. A. having a farm of 109 acres, which rents for $681.25, sells the same for $125 per acre, and invests the proceeds in U. S. 6's at 1083 %, brokerage % or purchasing; will his yearly income be increased or diminished, and how much? Ans. Increased $68.75.

CASE II.

266. To find what sum must be invested to obtain a given income.

1. What sum must be invested ir Virginia 5 % bonds, purchasable at 80 %, to obtain an income of $600 ?

obtain $600 will require $600 ÷ .05 = $12000 (Case 1). Multiply. ing the par value of the stock by the market price of $1, we have $12000 .80= $9600, the cost of the required stock, or the sum to be invested. Hence the

RULE. I. Divide the given income by the per cent. which the stock pays; the quotient will be the par value of the stock required.

What is Case II? Explanation? Rule?

II. Multiply the par value of the stock by the market value of one dollar of the stock; the product will be the required

investment.

EXAMPLES FOR PRACTICE.

2. If N. Y. 6's are 5 % below par, what sum must be invested in this stock to obtain an income of $840? Ans. $13300. 3. What sum must be invested in U. S. 10-40's at 981 %, brokerage % for buying, to secure an annual income of $1860? Ans. $36642.

4. When U. S. 5-20's of '82 are quoted at 1081, what sum `must I invest to secure an annual income of $1080, brokerage %? Ans. $23436.

5. If I sell $25000 U. S. 5-20's of '82 at 933 %, and invest a sufficient amount of the proceeds in U. S. 6's, at 109% to yield an annual income of $960, and buy a house with the remainder, how much will the house cost me?

CASE III.

Ans. $5957.50.

267. To find what per cent. the income is of the investment, when stock is purchased at a given price.

1. What per cent. of my investment shall I secure by purchasing the New York 7's at 105 %?

RULE. Divide the annual rate of income which the stock bears by the price of the stock; the quotient will be the rate upon the investment.

EXAMPLES FOR PRACTICE.

2. What is the rate of income upon money invested in % bonds, purchased at 87 per cent.?

Ans. 63%.

What is Case III? Explanation? Rule?