The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

Sec. 2] CONCEPT OF RATE OF INTEREST 193 petual annuity of $408, in semi-annual installments of $204. Tn six months more, or one year from the original invest- ment, he may realize $204 of income and $10,200 of “prin- cipal,” or $10,404 in all. Of this he may reinvest the original $10,000, retaining $404. From this point onward he may repeat the same annual cycles of sales and reinvestments, and, therefore, receive $404 net, payable once a year. He is, consequently, better off by $4 a year, than the holder of an annuity of $400 a year, payable annually. In other words, a rate of interest of 4 per cent per annum, if the income is payable semi-annually, Is equivalent to a rate of interest of 4.04 per cent per annum, if the income is payable annually. The same reasoning may be applied when the income accrues at quarterly or any other intervals.! By subdividing the time of payment indefinitely, we may pass from an income obtained in installments to a continu- ous flow of income. The idea of a uniform and perpetual stream of income is nearly realized in certain cases, as in the West, where water rights are sometimes bought in the form of a “miner's inch” — a perpetual flow through a square inch opening under a head of six inches. Let us suppose that the water is worth $100 a year. If the right to such a perpetual and uniform flow can be bought for $2000, the rate of interest is five per cent “reckoned continuously.” We thus reach the conclusion that there are various senses of the rate of interest, according to the frequency of payment, namely, — The rate of interest per annum, income payable annually. The rate of interest per annum, income payable semi-annually. The rate of interest per annum, income payable quarterly. The rate of interest per annum, income payable at other intervals. The rate of interest per annum, income payable continuously. while it is the least familiar in practice, is in The last named, : t natural, and lends itself the most some respects the mos 1 See Appendix to Chap. Xs.

Access restriction

Copyright

fullscreen: The nature of capital and income

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation