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.

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Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

Sec. 10] THE RISK ELEMENT 281 ment of caution is unduly strong, but are held for the most part by national banks. It is therefore misleading to cite, as some have done, the rates of interest realized on government bonds as an indication of the true rate of interest. A similar benefit attaches to the bonds of the Credit Foncier in France. These are sold on a very low “basis” because of the chance, connected with them, of winning prizes. § 10 In the general case we have to do not simply with the risk of falling below a specified income, nor with the chance of rising above a specified income, but with both. Thus, the dividends from common stock have no fixed minimum as do those from good preferred stock, nor any fixed maximum as do the interest payments from bonds. They may vary, and vary widely, in either direction. The amount of variation may be measured with reference to any specified amount selected arbitrarily as a basis of com- parison. For instance, in the case of stock which has yielded, in successive years, the following percentages: 5 5 6,5 5 4, 5 7,5 3, 4 5, we may for conven- ience take 5 per cent to serve for a basis of computa- tion. The stock has yielded 1 per cent or more in excess of this in two cases out of twelve; it has yielded 2 per cent in excess in one case out of twelve; it has fallen short by 1 per cent or more in three cases out of twelve, and fallen short by 2 per cent in one case out of twelve. If these fre- quencies are our only guide for judging the future, they represent the probabilities of receiving the respective divi- dends. On the basis of the foregoing figures it is possible to calcu- late the “riskless” and the “mathematical” value of the stock, and, if we know the caution factor, it is possible to calculate the © commercial” value also. Thus, the “risk- less” value, in this case, signifies that value which the stock

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