On Oct. 29th sight drafts on London were quoted at $4.881.

£1200
4.881

$5862.00 cost of exchange.

Ex. 2. How large a sight draft on London can be purchased for $3890, exchange at 4.861?

4.861)3890.

£800. Ans.

EXAMPLES CVIII.

Find the cost in New York of a Bill of Exchange for

1. £500 on London at 4.861.

2. £1750 on Glasgow at 4.85.

3. 50000 francs on Paris at 5.18.

4. 1250 marks on Berlin at 954.

5. 2000 milreis on Rio Janeiro at 54.9 [cents per milreis].

6. 3000 crowns on Vienna at par.

7. Calculate the cost at market prices (as found in some daily journal) of

a. £650.

b. 2400 francs.
c. 2000 marks.

8. What will be the face of a N. Y. draft on Bremen costing $297.96, exchange being at 951? (Omit decimals. of the answer.)

9. How large a draft on London can be purchased for $8554.14, exchange being quoted at 4.881?

10. How large a draft on Paris can be purchased for $1920, exchange being quoted at 5.18?

CHAPTER XIII.

STOCKS AND BONDS.

STOCKS.

264. There are many business undertakings, such as railways, banks, gas works, etc., which are on so large a scale that many persons must combine to provide the money necessary to carry on the business. This is generally done by dividing up the whole sum required into 'Shares' of definite amount, say of $10, or $50, or $100 each.

The whole body of partners is called a Company, and the individual partners are called Stockholders.

The total amount of money raised to carry on the business of the company is called its Capital.

The affairs of a company are managed by a small number of elected stockholders called Directors.

The profits made by the company are called Dividends, and are periodically divided among the stockholders; the dividend is declared as a percentage on the capital.

265. A stockholder in a company cannot demand the return of the money he paid for his shares; he can, however, sell the shares.

If the dividends of the company are high, and are likely to continue to be high, the shares will sell for more than they originally cost; if, however, the com

pany is not prosperous, the shares would have to be sold for less than they originally cost.

Thus, the stockholders in a company are continually changing, and different stockholders may have bought their shares at very different prices.

266. The most important point to notice is that the amount of dividend paid to a stockholder does not depend on the price at which his shares were bought, but simply on their nominal value.

Thus, two men who had the same number of $100 shares in a company would be entitled to the same amount of dividend, although one may have bought, for example, $100 shares for $180 and the other for $50 each.

267. Shares are said to be above or below 'par' according as they are sold for more or for less than their nominal value. The nominal value is $100 per share, unless otherwise stated.

Thus, if $100 shares sell for $110 each, since $110 is 18 of $100, the shares are 10 per cent above par.

When the price of shares is more than their nominal value they are said to be 'at a premium,' and when the price is less than their nominal value the shares are 'at a discount.'

268. The following are examples of the different questions which may have to be considered.

Ex. 1. $100 shares in a gas company sell for $240 each; how much will 70 shares cost?

Each $100 share costs $240 cash;

... 70 shares cost $240 × 70 = $16800.

Ex. 2. A man bought $100 shares in a gas company for $16800, giving $240 for each $100 share; how many shares did he buy? Since each share cost $240,

the number of shares =

$16800 $240 = 70.

Ex. 3. A gas company pays a dividend of 8% per annum; how much does a man receive who holds 70 $100 shares?

His share of the capital is $100 × 70 = $7000, and he receives 8% on this, or $560.

Ex. 4. A man invests money in the stock of a company, each $100 share costing $240; what % does he receive on his investment when the company pays an 8% dividend?

He receives $8 on each share, and having paid $240 for a share, he receives $8 on each $240 invested; 33%.

=

269. Sometimes a company does not need its full capital to carry on its business; and in that case only a certain fraction of the nominal amount of the shares is 'paid up'; the stockholders are, however, bound to pay the rest if it should become necessary. When a dividend is declared at so much per cent, this percentage is paid only on the amount paid up on the shares, and not on their full nominal value.

Ex. What income will be obtained by investing £1008 in the purchase of £20 bank shares, on each of which £5 is paid up, at £24 each share, the bank paying a dividend of 18 per cent?

Since £24 buys one share, £1008 will buy £1008 £24 = 42 shares. These 42 shares, on each of which £5 is paid, make up a capital of £5 × 42 = £210. On this capital of £210 a dividend of 18% is paid; hence, income required = £210 × 1% = £37. 16s.

EXAMPLES CIX.

Written Exercises.

1. If $10 shares sell for $3.50, how many shares can

be bought for $9271.50?

shares purchased?

What is the nominal value of

2. Mining shares of $10 each are sold at $2.50 discount; what is the price of 80 shares?

3. The shares of a certain company are sold at 10% above par; how much must be paid for 1060 $50 shares?

4. A company pays a dividend of 8%; how much does A receive if he holds 50 $50 shares?

5. A man holds 350 shares of $50 each, and the company pays 7% dividend; how much does he receive?

6. A man sells 63 $100 shares for $180 each, and buys with the proceeds $50 shares at $35 each; how many shares does he buy?

7. What is the difference between a $100 stock and $100 worth of stock?

8. A man sold 75 $50 shares for $65 each, and invested the money in $100 shares at $125 each; how many shares did he buy?

9. What income would be obtained by investing $3850 in the purchase of $100 shares in a company at $175 each, the company paying a dividend of 6% per annum?

10. $100 shares in a certain bank sell at $350, and the bank pays a semi-annual dividend of 7%; what annual income would be obtained by investing $9450?

11. A company pays a dividend of 41%, and its $100 shares sell for 50% above par; what per cent does an investor receive?

12. A man buys $50 shares at $62.50, and the company pays a 5% dividend; what percentage does he receive, and what % on his investment?

13. A man sells fifty shares of $100 gas stock, paying 8% dividend, at $180; he invests the proceeds in $50 railway stock at $35; find the change in his income, the railway company paying a dividend of 3%.