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Stocks and Investments.
ART. 296.—Capital is property or money invested in business.
ART. 297.-A Company is an association of persons whose object is the transaction of business.
ART. 298.—When a company is organized and governed by law, it is said to be incorporated. Such a company is also called a Corporation, and the law governing it is its Charter.
ART. 299.-Stock is the capital of an incorporated company. It is divided into equal parts called Shares.
Shares are generally $100 each.
ART. 300.—Certificates of Shares are called Stock Certificates, or Scrip; their owners are Stockholders, and the stock may be bought and sold like any other property.
ART. 301.—The Par Value of stock is the amount named in the certificate.
ART. 302.—The Market Value is the price for which it can be sold.
When stock sells for its original or face value, it is at par, or worth 100%; when it brings more, it is above par, or at a premium ; when it brings less than its face value, it is below par, or at a discount.
ART. 303.—A Dividend is a sum paid to stockholders out of the profits of the business of the company.
ART. 304.–An Assessment is a sum assessed upon stockholders to meet the losses or expenses of business.
ART. 305.—A Stock Broker is one that buys and sells stocks for a commission, which is called Brokerage.
ART. 306.—A Bond is an instrument, properly signed and authenticated, guaranteeing the payment of a sum of money on a specified date.
The processes in Stocks and Investments are based on the same principles as those under Percentage.
Formulas.-Assessment or dividend stock x rate %.
= assessment or dividend • stock.
= par value x (1 + rate %). Par value
= market value = (1 + rate %).
1. What is the cost of 50 shares in the West Creek Bridge Company, at 1.071, brokerage 3% ? Solution.—1.07+ $ 1,077, and $5,000 x 1.077 = $5,393.75.
2. What is the cost of 5 U. S. bonds of 1891 at 1101, brokerage £%?
3. How many Trenton Watch Company bonds at 1124, brokerage 1%, can be bought for $13,304.50 ? SUGGESTION.—$13,304.50 - $112.75 = 118.
4. How many shares of Western Union can be bought for $2,775 at 1104, brokerage %?
5. How many shares of the Blue Stone Company, bought at 504 and sold at 507, brokerage 5% each way, must be bought and sold to yield a profit of $600 ? SUGGESTION.—($507 $}) – ($50% + $]) = $; gain on each share. 6. What sum must be invested in stock
at 1087, which pays a semi-annual dividend of 4%, to yield an income of $1,200 ? SUGGESTION.-1 share yields annually ; $1,200 = $8
150 shares; $1084 x 150 $16,275.
7. What sum must be invested in Camden and Amboy Railroad bonds at 1083yielding an annual interest of
8%, brokerage being %, to secure an annual income of $800 ?
8. What annual income is secured by an investment of $18,050 in railroad stock at 90, brokerage 4%, if 5% semi-annual dividends are declared ?
9. What rate per cent. is realized from bonds bought at 140, and paying a semi-annual interest of 6% ?
SUGGESTION.—Annual income, $12 • investment, $140 = .081 = 87%.
10. What price should be paid for stock paying an annual dividend of 8%, to yield an income of 7% ?
SUGGESTION.—Since the annual income is $8, this is 7% of the price that must be paid. $8=.07=$114.
11. What price must be paid for bonds paying 8% annual interest, to yield an income of 10% ?
12. For what price must 4% bonds be bought that they may yield an income of 5%?
13. What will 200 shares of bank stock cost at 1041 ?
14. How many shares of railroad stock at 95 can be bought for $11,780 ?
15. How much money invested in 7% bonds will yield an annual income of $1,190 ?
16. Mrs. H. owns enough 5% stock to give her a semiannual income of $1,200: how much stock does she own?
17. A guardian invested $20,700 in 4% bonds at 103 : what income did it produce ?
18. If 43% bonds are bought at 90, what % do they pay on the investment ?
19. What price must be paid for 6% bonds to yield 10% on the money invested ?
20. What price must be paid for 6% bonds to yield 4% on the money invested ?
21. A person invested $3,480 in bank stock at 116, and received a semi-annual dividend of $120 : what was the annual rate of dividend ?
22. A medical college has its endowment fund invested in 4% state bonds, bought at par, from which a quarterly income of $1,120 is realized : how much money is thus invested ?
23. If a United States bond, bought at 108, pays $4.50 interest annually, what rate is received on the money invested ?
24. How much income will I receive annually by investing $3,088 in 5% bonds purchased at 48, allowing 4% brokerage ?
25. Which is more profitable, and how much, to invest $2,000 in 6% bonds purchased at 80, or in 5% bonds purchased at 663% ?
26. How much must be invested in 5% bonds purchased at 80 to secure the purchaser an income of $1,200 annually ?
27. The net earnings of a company whose capital stock is $1,500,000 was $80,000 : if $5,000 is reserved as a surplus fund, what per cent. dividend can be declared ? 28. I invested $13,500 in stocks at 60, brokerage 21%
par value : what was the par value of the stocks ? 29. A broker bought stock at 8% discount, and sold it at 10% premium, thereby gaining $540: how many shares did he purchase ?
30. The net earnings of a water company are $35,000 and the capital stock is $650,000 : if a surplus of $2,500 is reserved, what rate of dividend can be declared ?
31. Illustrate Stock Investments by an original problem.
ART. 307.—Interest is money paid for the use of money.
ART. 308.—The Principal is the money for which interest is paid.
ART. 309.—The Rate of Interest is the per cent. of the principal paid for its use for a year, or month.
ART. 310.—The Time is the period during which the money is on interest.
ART. 311.—The Amount is the sum of the principal and interest.
ART. 312.—Simple Interest is interest on the principal only.
ART. 313.—Compound Interest is interest on the principal and the interest.
ART. 314.-Legal Interest is interest at a rate fixed
ART. 315.-Usury is interest at a rate higher than that fixed by law.
ART. 316.—Interest differs from the applications of Percentage already explained only in the use of time as an element in connection with the rate per cent.
ART. 317.—The Principal is the Base; the Per cent. per annum, the Rate; the Interest, the Percentage; the Sum of principal and interest, the Amount.