STOCKS AND BONDS 269. A corporation is a body doing business as a single person under a general law or a special charter. 270. The capital of a corporation is called stock. The stock of a corporation is divided into a number of equal parts called shares. The face or original value of a share is its par value. 271. The par value of a share of stock is usually $50 or $100. Unless a different par value is expressed, $100 is the par value used in the examples of this book. 272. A certificate of stock is a document specifying the number of shares to which the holder is entitled, and the par value of each. 273. The price at which stock sells in the market is the market value. 274. The market price of stock is usually quoted at a certain per cent of its par value, but sometimes the market price of a share is quoted. Thus, on a certain day, Reading R.R. stock, par $50, was quoted in the New York market at 1701, which means that it was sold on that day at 170% of $50, or $85 per share. The same stock selling at the same price was quoted in the Philadelphia market at 851, meaning that it was sold at $85 per share. 275. A dividend is that part of the profits of a corporation which is divided among the stockholders. It is usually a certain per cent of the par value of the stock. Thus, if a 6% dividend is declared on stock, par value $50, the owners of the stock are paid 6% of $50, or $3, on each share owned. 276. A bond is a written obligation of a corporation or a government to pay a specified sum of money at a certain time, together with interest at regular intervals at a fixed rate per cent per annum. 277. Government bonds are of two classes, coupon and registered. 278. A coupon bond is a bond made payable to the bearer, and, when sold, passes by delivery without assignment. It has attached to it interest coupons payable to the bearer No. 99 STATE OF PENNSYLVANIA COUNTY OF CHESTER Borough of West Chester GENERAL LOAN BOND SERIES TWO This is to Certify, That the Borough of West Chester, County of Chester, and State of Pennsylvania, is indebted to bearer, or if registered to the registered holder hereof, in the sum of Five Hundred Dollars, payable in lawful money of the United States, on the First Day of January, A D. 1942, at the office of the Treasurer of the Borough of West Chester, in said Borough, upon surrender hereof, with interest thereon at the rate of four per centum per annum, payable semi-annually, upon the first days of January and July, until said principal sum is paid at the Treasurer's office upon the presentation and surrender of the annexed coupon, free from all taxes levied or to be levied upon this bond under any law of the State of Pennsylvania, now enacted or hereafter to be enacted, and for the payment of the said principal and interest the faith, honor and credit of the said Borough of West Chester are solemnly pledged. This obligation is one of a series, of one hundred and sixty obligations, of like tenor and date, of an authorized loan of Sixty Thousand Dollars Bonds numbered from one to one hun dred and ten inclusive, being for the sum of Five Hundred Dollars each, and bonds numbered from one hundred and eleven to one hundred and sixty inclusive, being for the sum of One Hundred Dollars each, issued in pursuance of an Ordinance duly enacted by the Council of said Borough and approved by the Burgess thereof on the 30th day of August, A.D. 1912, signifying the desire of the Borough of West Chester to increase its indebtedness by the sum of Sixty Thousand Dollars, and a Resolution of said Council likewise approved, passed on the 27th day of September, A.D. 1912, providing for the holding of an election at the time of the holding of the general elec tion in said Borough on the Fifth day of November, A.D. 1912, for the purpose of obtaining the consent of the qualified electors of the Borough, to such increase of indebtedness, and another Resolution of said Council likewise duly approved, passed on the 27th day of November, A.D. 1912, after the holding of said election at which a majority of said electors consented to the increase of said indebtedness; said indebtedness being incurred for the purpose of providing funds for the improvement of the equipment of the fire department, for the extension and improvement of the water system, and for street improvements and the removal of garbage. All of said bonds being valid and binding obligations of the said Borough and in the issuing thereof all requirements of law have been complied with. The said Borough of West Chester reserves the right to redeem all bonds of said issue, maturing at and after ten years from date at par, at any interest paying period, all accrued interest having been paid thereon, upon giving personal notice to the holder four weeks prior to the time of redemption, if the bond is registered, and if not registered, either by personal notice as aforesaid, or by an advertisement inserted once a week for four successive weeks, immediately prior to the date of said redemption, in a newspaper of general circulation published in said Borough, having respect to the lowest number in both denominations, in numerical order in making such redemption. This bond shall pass by delivery, but any holder may have the principal thereof registered in the Office of the Treasurer of said Borough, and after registration no transfer except upon the books of the Borough shall be valid unless the last preceeding transfer shall have been restored, but no registry shall restrain the negotiability of the coupon by delivery merely. at specified times. When interest is due, a coupon is cut off and presented to a bank for payment. 279. A registered bond is a bond issued without interest coupons, filled up in the name of the registered owner, made payable to him or his assigns, and registered in his name. 280. Interest on registered bonds is sent to the registered owner or to his attorney as it becomes due. 281. Bonds may sell above or below their face value, and are usually quoted in the market at a certain per cent of their face value. Bonds are usually named from the rate of interest they pay and the year in which they are payable. Thus, "U. S. 4s reg., 1925" means U. S. Government bonds registered, bearing 4 % interest and payable in 1925. 282. Brokerage is the commission charged by a broker for buying or selling stocks or bonds for another person. It is reckoned on the par value, and the usual rate is 1%. 283. Stock is usually bought and sold in a place called the stock exchange, which is merely an auction room where brokers having stocks to sell endeavor to dispose of them to other brokers having orders to buy such stocks.% of the par value is usually charged by the broker selling the share and by the broker buying the share. Illustrative Examples 1. Find the cost of 10 shares of Penn. R.R. stock ($50) at $611⁄2 a share, brokerage %. % of $50, or $0.0625 = the brokerage on 1 share. $61.6875 the entire cost of 1 share. ..10 x $61.6875, or $616.88 = the entire cost of 10 shares. 2. Find the proceeds of 8 shares of Reading R.R. stock ($50) quoted at 1711 %, brokerage %. par value of 1 share. 1711% of $50, or $85.625 the market value of 1 share. % of $50, or $0.0625 $85.5625 the brokerage on 1 share. ..8 × $85.5625, or $684.50 the net proceeds of 8 shares. = 3. A sent his broker $ 6000 to be invested in Southern Pacific R.R. stock at 111%, brokerage %. How many shares did this sum buy, and what was the surplus? |