Commercial Arithmetic

2°. Time bargains are speculative transactions without the payment or transfer of stock or shares. At the time appointed the parties receive or pay the difference between the then price and the price named.

3°. A bull buys stock, for which usually he cannot pay, with a view to selling again at a higher price.

A bear sells stock, which usually he does not possess, with a view to buying back at a lower price.

The Americans use the terms "long" and "short" for "bull" and "bear."

At the settlement the difference in the buying and selling prices alone changes hands.

4. Contango is a sum paid per cent. or per share by a speculator for the rise for the privilege of deferring payment till the next settlement.

Backwardation is a sum paid per cent. or per share by a speculator for the fall to postpone delivery of shares or stock till the next settlement.

Both these are called "continuation rates." The postponement is called "carrying over."

5°. Options are transactions by which a speculator limits his losses by paying a fixed sum when the bargain is made. They may be "a put and call," "a put" or a call."

A put and call enables an operator to sell or purchase at a fixed price on a certain day.

A put enables an operator to sell at a fixed price on a certain day.

A call enables an operator to buy at a fixed price on a certain day.

The Americans use the term "spread" for a "put" or "call."

A straddle is the same option at one price whether a put or call.

STOCKS AND SHARES.

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6. Arbitrage occurs when identical securities are bought in one market and sold in another.

7°. Hammering is the declaration of a defaulter. The head waiter strikes three blows with a mallet.

8°. Cornering occurs when a scarcity of stock is created to prevent a dealer from obtaining what he has previously sold except at much higher prices. The dealer is said to be "cornered." This happens when the dealer undertakes to deliver stock or shares beyond his powers.

9°. Slang terms and contractions are used for nearly every stock known; e.g. Brums, i.e. L. and N. W. R. Stock; Goschens, i.e. 2 Consols; Saras, i.e. Sheffield Deferred.

Outside Brokers, i.e. brokers who are not members of the Stock Exchange, supply their customers through the brokers who are members. The commission charged being halved between the outside broker and the member he employs.

22. The Calculation of Stocks.

The calculation of stocks is very similar to that of freehold property (q. v.).

What is called rents in freehold property is called dividends in stock, but in each case a permanent yearly or half-yearly income is purchased for a specified sum paid at once.

Stock is not money, but value for money. It gives the holder the claim to a certain yearly or half-yearly dividend. Like all purchasable property or income, its price varies with the stability of Governments and the prosperity of countries.

Brokerage must always be reckoned in all the calculations.

For Government stocks the charge is usually p.c., for others from top.c. or more.

It is always added to, or subtracted from, the price.

The chief questions are:

1o. To find cost of buying a given quantity of a certain stock at given price.

Divide quantity by 100 and multiply by the price plus brokerage.

Note. The interest is of no account in this question.

2°. To find how much stock of given price can be bought for given money.

Multiply money by 100 and divide by the price plus brokerage.

Note. The interest is of no account in this question.

3. To find gain or loss by selling out.

Multiply difference of buying price plus brokerage and selling price less brokerage by the amount of money invested and divide by 100.

Note. The interest is of no account in this question.

To find how much new stock of given price can be bought from the proceeds of selling out a given amount of stock of given price.

Divide given amount of stock by 100 and multiply by the price less brokerage.

Multiply the proceeds by 100 and divide by the new price plus brokerage.

Note. The interest is of no account in this question.

5. To find income from investing a given sum in stock of given price and rate.

Multiply rate by sum and divide by price plus brokerage, or

rate

100

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Find stock purchasable by 2°, and multiply it by

6°. To find rate of interest (p.c.) given by investing in a stock of stated price and rate.

Multiply rate of stock by 100 and divide by price plus brokerage.

Note. The amount invested is of no account in this question.

7°. To decide which of two stocks is better investment.

Find rate of interest given by each from 6°, ΟΙ rate × 100 compare the fractions

price + brokerage The greater is the better.

Note. The amount invested is of no account in this question.

8°. To find alteration in income by transferring from one stock to another.

Obtain the proceeds of selling out from first stock as in 4°.

Also get income from first stock by second rule in 5°, and use first rule in 5° to get income from investing in new stock the proceeds of selling out.

The difference is the alteration in income.

9°. To find at what price a stock of given rate can be bought so as to give a certain rate p.c. interest. Multiply dividend rate by 100 and divide by rate of interest desired.

Add brokerage for answer.

Note. The amount invested is of no account in this question.

Example 1. To buy £7000 stock in 3 per cents. at 94, brokerage

p.c.

7000=70 × 941=6580+83=£6588. 15s. Od. cost.

Example 2. What stock in 4's at 108 will £1000 buy?