Compare the problems of §§ 484-486 with the three problems in percentage on page 267. 487. Brokerage. - Stocks are usually bought and sold through an agent called a broker. His fee for buying and selling is usually 1% of the par value of the stock. Thus, if a stock is bought for 98, of a dollar must be added to the cost, making it 983. If stocks are sold, of a dollar must be subtracted from the value of the share. Thus if a stock is sold at 1081, the net returns to the seller will be 1081. PROBLEMS 1-24. Solve the exercises in §§ 484–486, allowing 1% brokerage. In each of the following allow 1% brokerage both for buying and selling. 25. Bought 150 shares of Milwaukee and St. Paul R. R. shares at 98 and sold same for 993. Find gain. 26. Sold 120 shares of bank stock at 160. What did I receive for the stock? 27. If I buy 150 shares of L. V. R. R. stock at 90, what will it cost me? 28. The brokerage on 500 shares of stock was $62.50. What per cent was charged? 29. Bought 160 shares of telephone stock at 991, and sold it at 103. Find my gain. 30. Bought stocks at 961⁄2 and sold at 1023, thereby gaining $1687.50. What was the total value of the stock at par? 31. What must be the market value of bank stock yielding 8% dividend to give 5% on the investment? 32. A man invested $27,090 in New York Electric stock at 1127. If the stock pays 6% dividends, what was his annual income? What was the rate of income on his investment? For how much would these shares sell to give the investor 63% on his investment? 33. How much must be invested in copper at 75 to yield an annual income of $1200 if the stock pays 5%? 488. Prices of Common and Preferred Stocks. - In the table on the opposite page we notice that in most cases the preferred stock is quoted at a higher price than the common stock, while in some cases (Baltimore & Ohio, Atchinson, and notably General Motors) the common stock is higher than the preferred. In some companies the revenue is so small that after paying interest on bonds and dividend on preferred stock there is little left with which to pay dividends on the common stock and the rate of dividend on the latter is therefore low. In such cases the common stock sells at a low figure. In other companies the revenues are high so that after paying all fixed charges there is a large surplus from which to pay dividends on the common stock. In such cases the dividend on the common stock may be much higher than the dividend on the preferred and the market prices on these stocks will compare accordingly. Many strong companies have no preferred stock, such as the Pennsylvania, New York Central, Northern Pacific, etc. WRITTEN EXERCISES Find the gain of one who bought at the lowest price and sold at the highest on Feb. 24, 1916 (see opposite page) counting 1% brokerage CHAPTER XXXIII BONDS 489. Bonds, by Whom Issued. - Bonds are promissory notes issued by national and state governments, by municipal corporations such as counties and cities, and by private corporations. A bond having the record of ownership transferred on the books of the company. 491. Coupon Bonds. -State and municipal bonds are usually coupon bonds. That is, the bond has attached to it little slips which are really promissory notes covering the interest from year to year. These slips, called coupons, may be cut off as they become due and deposited in the banks for collection. This saves the trouble of making transfers on the books of the issuing corporation in case the bonds are sold. The coupons and the bond, when due, will be paid to anyone having them in his possession. 492. Mortgages. A mortgage is a conditional instrument of sale. The sale becomes effective in case certain payments specified in the mortgage are not made. Bonds issued by industrial corporations are usually secured by mortgages on the property of the corporation. A very common method of borrowing money is to give a promissory note secured by mortgage on any sort of property. STOCK CERTIFICATE |