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STOCKS AND INVESTMENTS

325. A corporation is a body of individuals, or a pany, authorized by law to transact business as one perso 326. Stock is the capital or money subscribed by a poration to carry on its business.

327. A share is one of the equal parts into which stock of a corporation is divided.

The value of a share varies in different companies. When not o wise stated, $100 will be understood to be the value.

328. A certificate of stock is a paper issued by a poration specifying the number of shares to which the h is entitled, and the original value of each.

329. The par value of stock is the sum for which scrip or certificate was issued.

330. The market value of stock is the sum for w it can be sold.

Stock is at par when its market value is 100%; above par, o premium, when its market value is above 100% ; and below pa at a discount, when its market value is below 100%. When stock par, it is quoted at 100; when it is 5% above par, at 105; when it i below par, at 95.

331. A stock broker is one who buys and sells st for a commission, called brokerage.

332. Premium, discount, and brokerage are a percentage computed upon the par value of the stock.

333. A dividend is a sum paid to the stockholders f the profits of the business.

334. Net earnings are the moneys left from the profits of a business after paying expenses, losses, and the interest upon the bonds.

335. A bond is a written instrument securing the payment of a sum of money at or before a specified time.

The principal bonds dealt in by brokers are Government, State, City, and Railroad bonds.

336. A coupon is a certificate of interest attached to a bond, to be cut off and presented for payment when the interest is due.

Bonds are quoted in commercial language by the rate of interest which they bear. Thus, U. S. bonds bearing 6% int. are quoted as U.S. 6's; U. S. bonds bearing 44% int., payable in 1891, are quoted as U. S. 4's, '91.

Bonds issued by States, cities, etc., are quoted in a similar manner. Thus, S. C. 6's are bonds bearing 6% interest, issued by the State of South Carolina; so, also, Mo. 7's, N. Y. 5's, etc.

337. The corresponding terms in stocks are as follows:

1. The par value is the base.

2. The rate % of premium or discount is the rate.

3. The premium or discount is the percentagc.

4. The market value is the amount or difference.

WRITTEN

EXERCISES.

338. Find the cost

1. Of 250 shares of Lake Shore R. R. stock, the market value of which is 104, brokerage 1%.

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(Market value of 1 share + brokerage) × No. shares = cost.

2. Find the cost of 250 shares of Western Union Telegraph stock, market value 973, brokerage %?

3. A broker bought for me 15 one-thousand-dollar U. S. 5-20 bonds, at 1121, brokerage 1%. What was their cost?

4. Bought 120 shares of Pacific R. R. stock, at a discount of 24%, and sold the same at an advance of 12%. What was my gain?

339. Find the number of shares

1. Of bank stock at 105, that can be bought for $25260, including brokerage at 1%?

SOLUTION.-(105% +1%) of $100 = $1051, cost of 1 share. $25260 $105 = 240, No. of shares.

FORMULA: No. of shares = investment ÷ cost of 1 share.

2. How many shares of telegraph stock can be bought for $12240, at 10% discount? At 20% premium?

3. How many shares of Mo. 6's, at 972, brokerage 1%, will $21560 purchase?

4. How many shares of the Bank of Commerce, at 110, can be bought for $22567.50, brokerage 1%?

340. Find the amount of investment

1. In U. S. 5's of '81, at 111, so as to realize therefrom an annual income of $2500?

SOLUTION.-$2500÷$5, income on 1 share = 500, No. of shares. $111, price of 1 share × 500 = $55500, investment.

FORMULAS:

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1. Given income÷inc. of 1 share=No. shares. 2. Cost of 1 share × No. shares = investment. 2. What sum invested in Tennessee 6's at 85, will yield an annual income of $1800 ?

3. What sum invested in any stock at 105, which pays 5% semi-annual dividends, will secure an annual income of $2000?

341. What annual income

1. Will be realized by investing $22260 in 41% bonds, bought at 921, brokerage %?

SOLUTION. (921% +1%) of $100 = $92, cost of 1 share;

$22260 $92.75 240, No. of shares;

=

$4.50, income on 1 share x 240 = $1080, total income.

FORMULA:

Investment cost of 1 share

x inc. on 1 share total inc.

2. What income will $19650 invested in U. S. 34's at 971 yield, brokerage %?

3. If $48000 is invested, in 5% stock, at 951, and in 6% stock at 112, brokerage %, what annual income is secured?

4. A farm which rents for $411.45 per annum, is sold for $8229, and the proceeds invested in 5% bonds at 105, brokerage %. Is the yearly income increased or diminished, and how much?

342. Find the rate of income

1. Realized from bonds bought at 112, and paying 4% semiannual dividends.

EXPLANATION.-Since $112, the cost of 1 share, pays $8 annually, the income is of the investment, or T of 100% = 7%.

Annual income

FORMULA:

per cost per share

share

= rate of income.

2 What per cent. of his money will a man obtain by investing in 6% stock at 108? At a discount of 16%?

3. If stock paying 10% dividends is at a premium of 121%; what % of income will be realized on an investment in it?

4. Which will yield the better income, 8% bonds at 110, or 5's at 75; 5's at 70, or 6's at 80 ?

5. Which is the more profitable, and how much, to buy N. Y. 7's at 105, or 6% bonds at 84 ?

EX CHANGE.

343. Exchange is a method of remitting money from one place to another, or of making payments by written orders, called bills of exchange or drafts.

344. Exchange is of two kinds-domestic and foreign.

345. Domestic or inland exchange relates to remittances made between different places of the same country. An inland bill of exchange is commonly called a draft.

346. A draft or bill of exchange is a written request or order upon one person to pay a certain sum to another person, or to his order, at a specified time.

The drawer of a draft or bill is the party who signs it; the drawee is the party to whom the order is addressed, and when he accepts the order, he becomes the acceptor. The payee is the party to whom the money is directed to be paid. The buyer or remitter is the party who purchases it. The buyer and payee may be the same party.

A sight draft or bill is one that requires payment to be made when presented.

A time draft or bill is one that requires payment to be made at a certain specified time, after date, or after being presented.

347. The acceptance of a draft or bill is the agreement by the drawee to pay it at maturity. This is done by writing the word "Accepted" across the face of the bill and signing it.

Three days of grace are allowed on time drafts, the same as on notes, but not on sight drafts. When a bill is protested for non-acceptance, the drawer is bound to pay it immediately.

348. The course of exchange is the current price paid in one place for bills of exchange on another place.

Exchange is at par, above par, or below par, according to the fluctua tions of trade between the two countries or places.

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