270. Coupon Bonds.-Coupon bonds, like the one shown above, contain coupons for each interest just as the common coupon notes described on page 238. The coupons when due are often left as deposits at a bank which collects them for its customers. Coupon bonds can be sold as any other property without notifying the concern issuing them. Therefore, while it is much simpler to trade in coupon bonds, they are not nearly as safe as registered bonds. Why? Most bonds issued now are coupon bonds. These may be protected by registration of the principal.

EXERCISES

1. How much above or below par is a $1000 bond bought for $945? for $1215? for $765?

2. What will a school district receive for each $500 bond sold at 98 % of its par value? at 104 % par value? 3. What is the yearly income from a $1000 city bond drawing 5% interest? from eight such bonds?

4. What is the yearly interest from six 41% U. S. bonds, par value $100 each?

5. What is the yearly income from seven 41% U. S. bonds, par value $ 500 each?

6. What will be the yearly income from a $ 1000 bond drawing 6% interest issued by the Grange Elevator Co. ? Suppose that this bond was bought for $ 1145, how much was invested to get a return of $ 60 per year? What rate of interest was this on the $ 1145 invested?

7. What is the rate of investment of a $ 500 city bond drawing 5% interest if bought at $ 435? at $ 540 ?

8. What is the yearly income of a $1000 Pike township 5% interest bond? If the usual rate of interest is 7 %, how much can you afford to pay for it?

9. What is the yearly income from a $ 1000, r % bond? State by an equation what should be paid for such a bond so as to make R % on the money invested.

10. For what must a 6% $ 1000 county bond be bought so that it will pay 5 % interest? 7% interest?

11. For what must a 5% $ 1000 state bond be bought so that it will pay 6% interest? 4% interest?

12. Would you rather own a registered or a coupon bond issued by the same company for the same amounts and drawing the same rate of interest? Why?

271. What is a Good Investment ?-Every investment must be looked at from two standpoints, security and rate of interest. Security must always be considered first. It matters not how high the rate of interest may be; if the security is poor, then it is a poor investment. Too many have been led astray with the prospects of large returns and have lost both principal and earnings. The following are a few rules for the inexperienced investor:

1. Investment in any untried venture is risky.

2. As a rule no one will sell a thing this week for less than he knows that he can sell it next week.

3. One who offers a rate of interest higher than the usual one does not have good security to offer.

4. Invest, but never speculate.

5. Never accept a stranger's statement regarding any security; nor the statement of a friend who is not an expert in the particular enterprise in question.

6. Always get the advice of your banker on any investments you contemplate. The bankers of your city are safe, unbiassed expert advisers on investments.

7. Make your slogan: "Safety first, rate of interest second."

EXERCISES

1. What is the first thing to look at in making an investment? Apply this to buying mining-stock.

2. Mr. Wools owns a farm valued at $20,000, upon which he borrowed $ 3000 at 5% interest. Another man borrowed $ 6000 on a farm valued at $ 8000 and paid 7% interest. Why the difference in rate of interest?

3. What place should rate of interest take in making an investment?

272. Savings. All young persons should lay aside for investment at least a part of what they earn or have given to them. In no other way can they become independent. Thrift requires a constant watchfulness over income and expenditure. It means the elimination of waste in every manner possible. Many persons waste by buying foolishly. How? Many try to save by buying a cheaper article which causes an added expense later. Give an illustration. Others decrease their income because they do not make the most of their earning capacity. Give an example.

EXERCISES

1. Mary considers buying a gingham dress for $12.50. She finds, however, that she can get a better dress at less cost by buying 5 yd. material at 49 ¢ per yard, 12 doz. buttons at 50¢ per dozen, yd. linen for a collar at $ 1.50 per yard, and 25 ¢ for thread and a pattern. How much does she save?

2. Suppose that Henry, who carries papers, saves 50 ¢ of his earnings each week, how much will he save in a year? How much interest will this bring him per year at 6 %?

3. Richard found that he could buy the seeds for his garden from one firm for $ 1.80, while he would have to pay $2.40 to another firm. What per cent of the cheaper seeds did he save by buying these?

4. Richard sold for $16.50 the vegetables he raised from the garden that he planted from the cheaper seeds. If 40% of the seeds were not fertile, what was his loss at the same rate that he sold the vegetables he did raise?

5. If the more expensive seeds had been only 15% not fertile, what would have been the loss? Compare the two classes of seeds.

XVIII

BANKING

273. Functions of Banks.-Banking had its origin with the money-exchangers of old who stationed themselves in the market-places to change money for the purchasers. Gradually these exchangers began to accept money for safekeeping and to lend money. From this crude origin among the ancients has come our modern bank.

The principal functions of our banks of to-day are to accept money on deposit for safe-keeping; to provide a safe, simple medium for transferring money, as in paying a debt; and to lend money. National banks may also issue bills— paper money—which are secured by government bonds deposited with the comptroller of the currency at Washington. Notice some money in bills to find one issued by a bank and not by the United States Government.

274. Opening an Account.-In opening an account at a bank your signature is first taken and filed for identification if needed. How could such a need arise? Some banks require references of strangers opening a new account. Why? A bank may also require a certain average deposit or ask a small charge of the depositor, as one dollar per month, before it will carry a checking account. This is especially true of the banks in the larger cities. The average daily deposit required varies from $ 50 to $500.