SOLUTION.

The time is found from the date of the note until the time of the first payment, then from the time of each payment to that of the next.

The interest on $1 at 6% for this time is placed after the time. The amount of each payment is placed after its date. The interest on $3275 from the date of the note until the date of the first payment is 3275 $.053=$174.67. The first amount $3449.67.

=

Deducting the first payment gives the second principal, $2924.67. The interest on $2924.67 from the time of the first payment to the time of the second payment is $148.67.

Since the second payment is less than the interest due, the second payment is added to the third payment, and the interest on $2924.67 until the third payment is found to be $194.49.

The amount of $2924.67 until the third payment is $3119.16. The third principal after deducting the sum of the payments is $2269.16.

The amount of $2269.16 until the date of settlement is $2328.54.

Exercise 91

1. A note for $325 was dated June 16, 1924. The rate of interest was 6%. A payment of $130 was made on May 4, 1925. How much was due at the time of settlement, August 30, 1925?

2. A note for $430 with interest at 6% was dated May 15, 1915. A payment on it was made May 15, 1916, of $125. A second payment of $85 was made Nov. 15, 1917. How much was due on May 15, 1918?

3. A note for $2790 bearing interest at 7%, dated July 4, 1920, has payments indorsed as follows: April 20, 1921, $430; Aug. 16, 1921, $215; Dec. 3, 1922, $580. Find the amount due July 4, 1923.

4. A note for $850 payable in 3 years with interest at 5%, payable semi-annually, has an indorsement of $95 paid at the first interest paying time; $170 paid at the second interest paying time; and $235 paid at the fourth interest paying time. At the other interest paying times only the interest was paid. How much was due at maturity?

CHAPTER XI

STOCKS AND BONDS

90. Investment in a partnership.

1. A and B go into partnership and buy a dry-goods store. A invests $3000 and B invests $2000. They hire C to take charge of the store and agree to share the profits according to the amount of money invested. What part of the capital has each invested? What part of the profits should each receive?

2. The first year the net profits were $800. How much did each partner receive? The profits were what per cent of the money invested?

3. For the first three years the net profits each year averaged 15% of the money invested. What were the total net profits for the first three years? What were A's profits? What were B's profits?

4. If the same rate of profits continues, is this store a good investment? How does it compare with lending money in your community, with good security, at the rate usually paid?

5. If money can be lent for 6%, how much must be lent to secure an income equal to the average yearly income from this store? How much, if money is lent at 5%? How much in a Postal Savings Bank at 2%? How much must be invested in Liberty Bonds at 41%?

6. If a man wants to invest so as to secure 6% on his investment, how much can he afford to pay for this dry-goods store if the net profits continue to average annually 15% of the capital that A and B invested? How much can he afford to pay if he wants to make 8% on his investment?

91. Organizing a corporation. A and B wish to enlarge their dry-goods business. To do this they must have more money. There are other men who are willing to invest money in the store if A and B will organize a corporation or stock company, but who are not willing to invest in a partnership. We shall see some reasons why investment in a stock company may be preferred to investment in a partnership.

The money contributed by the members of the corporation to carry on the business is called the capital.

The capital is divided into shares. The shares are called stock, and the persons who own the stock are called stockholders. A share is usually $100, but may be more or less. The amount of capital that a share represents is called its par value or face value..

A and B get permission from their state government to organize a corporation for the purpose of carrying on a mercantile business. Each takes a certain amount of stock and they find other men who are willing to take the remainder. Persons who agree to take stock in a corporation, that is, agree to invest money in it, are said to subscribe the stock.

After all the stock is subscribed the stockholders meet and organize, electing a president, secretary, treasurer, and other necessary officers, and a board of directors. A is elected president and B is elected treasurer. The state now issues to these stockholders a charter which defines the rights and powers of the corporation. The name of the corporation is The Oswego Mercantile Company. On the following page is one of its stock certificates.

In speaking of the profits in the following exercises we shall mean the net profits, that is, the profits left after all expenses are paid. When the net profits are distributed among the stockholders they are called dividends. Dividends are always computed at a certain per cent of the par value of the capital stock.

CAPITAL STOCK

$20,000
No. 6

SHARES $100 each

20 Shares

This Certifies that R. S. Miller is the owner of Twenty shares of the Capital Stock of The Oswego Mercantile Company, transferable only on the books of the Corporation by the holder hereof or by Attorney upon surrender of this Certificate properly indorsed.

In witness whereof the said Corporation has caused the certificate to be signed by its duly authorized officers, and to be sealed with the Seal of the Corporation at Oswego, New York, this twelfth day of March, 1920.

WILLIAM H. SCOVILLE

President

(Seal)

ARTHUR H. WILLIAMS
Treasurer

Each stockholder gets a stock certificate, which tells the par value of a share and the number of shares he owns.

Many corporations issue two kinds of stock, preferred and common. As a rule preferred stock receives a fixed rate of dividend if so much is earned, and the remaining dividend goes to common stock. However, methods of division of dividends between preferred and common stock differ widely.

92. Advantages of a stock company over a partnership. (a) Each member of a partnership is liable for all of its debts. If a partnership fails, a member may lose not only all that he has invested in the partnership, but other property not invested in the partnership may be taken to pay its debts. If a stock company fails, a stockholder loses no more than he has invested except in certain cases specified by law.

(b) One partner may not withdraw from a partnership without the consent of the other partners.

A stockholder may sell his stock at any time.

(c) The withdrawal of a partner dissolves a partnership. The withdrawal of a stockholder does not dissolve a corporation.