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

196 NATURE OF CAPITAL AND INCOME [Crap XII $102 is due, the debt is renewed for another six months at the same rate. It is evident that the $102 will then, by “ compounding,” amount to $102 x 1.02, or $104.04. The interest then, at the end of a year, instead of being $4, is $4.04. In other words, 4 per cent interest reckoned half- yearly is equivalent to 4.04 per cent reckoned yearly, as was also the case under the price concept of the rate of interest. In the same way we may consider quarterly or other inter- vals for compounding. At the limit, the interval for com- pounding may be reduced to an instant.’ We have then two methods of defining interest. In both of them the time element is prominent. Before pass- ing on we should here remark that the {ime element enters not only as referring to the times of payment but also to the time of contract. A rate of interest implies not only the two points of time between which the goods for exchange are available, but also the point at which the de- cision to exchange them is made. It would be quite pos- sible, for instance, to agree in the year 1900 to exchange $1000 in the year 1901 for a given sum or series of sums returnable at still later dates. In this case the rate of interest for this exchange appertains to the year 1900, although execution of the contract does not begin until a year later and is not concluded until later still. These conditions have often been overlooked in treating statis- tics of the rate of interest. §5 We have defined the rate of interest both in the “price” and the “premium” sense. The question now arises whether these two concepts are interchangeable. Under certain conditions they are, and under others they are not. Cases in which the two are interchangeable are shown in the following propositions. g 1 For the mathematical relations involved, see Appendix to Chap. Il, $2.

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