3. Under what other conditions will property tend to decrease in value? to increase in value? 4. Mr. Gray wishes to buy a farm. What conditions will he probably consider in selecting it? 5. Agents sometimes show plans of lots in sections of land in a distant city or state. Is it wise, as a rule, to buy such land without seeing it? 6. Mr. Arnold bought a house for $5,400, spent $200 for improvements, and then sold it for $6,300. Find his per cent profit. 7. Mr. Curtis had an opportunity to lend $2,000 on some real estate at 51% interest or to invest it in a Mexican mining stock that promised 10% return. Which was the wiser investment? 8. A house was purchased for $6,000. For what must it be rented per month to return to the owner 9% on the investment? 9. Mr. Parker bought a $5,000 house and paid $3,000 cash, giving a mortgage for the rest. Find the semiannual interest due on the mortgage at 5% a year. 10. Mr. Sheldon bought a $6,000 house and paid $3,500 cash, giving a mortgage for the rest. Find the semiannual interest at the rate of 51% a year. 11. Mr. Brown bought a house for $4,000 and rented it for $30 a month. If his taxes were $80 and his repairs $40 for the first year, find his net income for that year. What per cent was this of his investment? 12. Mr. Lawson bought a house for $5,000. Taxes and insurance average $100 a year, and repairs $80. For what must he rent the house to net 6% on his investment? 13. Mr. Walker bought a house for $4,000 and rented it for $30 a month. Taxes, insurance, and repairs average $122 a year and a collector charges 5% for collecting the rent. How much is the net income? What per cent, then, does Mr. Walker realize on his investment? 14. Mr. Johnson bought a $5,000 house by paying $3,000 cash from savings invested at 4% and giving a first mortgage for $2,000 at 5%. From the items of yearly expenses given here, find how much rent he is really paying per month. Loss of interest on $3,000 at 4% Interest on $2,000 mortgage at 5% Taxes on $4,500 at $24 per $1000 Repairs and incidentals Insurance. $ 73. 7. 4 BUILDING AND LOAN ASSOCIATIONS A very safe and useful way of investing money to secure funds for building homes or to accumulate savings for other purposes, is in building and loan associations. In some states these associations are called coöperative banks. One becomes a shareholder in the association by depositing one dollar per month for each share taken. As a rule, no person can legally hold more than forty shares. All shares participate in the profits until they have a value of $200. Earnings are usually at the rate of 5%. If a person deposits one dollar a month, his share will reach the value $200 in a little over 12 years (12 yr. 2 mo.). If a person deposits $10 a month, his shares will amount to $2,000 in that time. A shareholder may always withdraw the whole or any part of his unpledged shares by signing a withdrawal book. Loans are made by the association on real estate in sums not exceeding $8,000 to any one person or on any one piece of property. A borrower must become a shareholder and must pledge one share for each $200 borrowed. Loans are usually made at 6% interest. All payments of dues must be made promptly. There is a fine of 2¢ per month for each dollar of dues and interest unpaid. PROBLEMS 1. Mr. Harris holds one share in a building and loan association. How much does he deposit in one year? 2. How much does Mr. Harris deposit in 12 yr. 2 mo.? How much does he receive? What is the difference? 3. Mr. Lawrence has 10 shares. How much does he deposit in one year? in 12 yr. 2 mo.? 4. Find the difference between what Mr. Lawrence paid in and what he received at the end of 12 yr. 2 mo. 5. How can the association afford to pay to a shareholder more than he has paid in? 6. Mr. Bradley has 15 shares in the association. He found it necessary to postpone payments for two months. How much was his fine? 7. Mr. Arnold borrowed $1,000 at 6% from the association. How many shares in the association did he have to take as a pledge for the amount borrowed? 8. How much did he have to pay a month on these shares? 9. To how much does the interest on $1,000 at 6% amount in a month? 10. How much, then, did Mr. Arnold have to pay monthly, to cover both his dues and interest? 11. Mr. Crawford borrowed $4,000 at 6%. How many shares did he have to take? How much did he have to pay each month, to cover his dues and the monthly interest on the loan? 12. If one wishes to accumulate savings for some particular purpose, give several advantages of the monthly dues plan. STOCKS While it is possible for an individual to conduct a business on a small scale, he could not, as a rule, carry on a business requiring a very large amount of money to run it. Large enterprises are usually carried on by corporations, or groups of individuals. A corporation is a company authorized by law to conduct business just as an individual does. Its rights and duties are clearly stated in its certificate of incorporation, called a charter. We will suppose that a group of men wish to organize a company for the manufacture of automobile tires and that they will need $100,000 to start and carry on the business. As they cannot furnish all this money themselves, they secure a charter and organize as the Century Tire Company. They divide the $100,000 capital stock into 1,000 shares of stock at $100 each and sell these shares in the Century Tire Company to any who may wish to join in the enterprise. All who purchase stock become stockholders and hence members of the corporation. At any meeting of stockholders, the members of the corporation have votes in proportion to the number of shares of stock they own. How much money would a person invest who bought five shares of the Century Tire Company? twelve shares? Stock certificates are issued to members of the corporation, showing how many shares have been purchased, the face value or the par value of each share, and how the shares may be transferred to another person. This is a typical stock certificate. In what state was this company incorporated? What is the par value of each share? How many shares of stock were purchased by Mr. Fowler? Shares of stock are transferable only on the books of the company by the holder of the stock or by his attorney upon the surrender of the certificate, properly indorsed. The business of the corporation is conducted by a board of directors who are chosen by the stockholders. |