The fiscal problem in Missouri

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Monograph

Identifikator:: 1833271335

URN:: urn:nbn:de:zbw-retromon-230042

Document type:: Monograph

Title:: The fiscal problem in Missouri

Place of publication:: New York

Publisher:: National Industrial Conference Board, Inc.

Year of publication:: 1930

Scope:: xvi, 359 S.

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IX. Financing the capital requirements of the State

Collection:: Economics Books

276 THE FISCAL PROBLEM IN MISSOURI £50,000 or $100,000, without destroying the uniformity provided in the table to any great extent. Also, as a practi- cal matter, it might be desirable to adjust the interest rate according to maturity; and, if this were done, the interest payments would not decline by the exact amounts as indi- cated. A uniform interest rate of 415%, or some lower rate, could be used on the theory that the shorter maturities would no doubt sell at a discount and that the longer maturities would sell at a premium that would at least compensate for the discount. Under no circumstances should it be assumed that $40 million obtained from the sale of bonds is comparable to $40 million collected in equal installments over a period of years. Let us assume that $4 million will be collected each year for ten years, the first installment coming due one year hence. The present value of the ten amounts of $4 million each assuming interest compounded at the end of each year at a rate of 424%, is $31,650,873. It is the latter amount that is comparable with $40 million collectible in ten installments as indicated. Using the same assumptions as to interest and the time the first installment came due, there would have to be collected a total of $50,551,528 in ten annual payments in order that a present value of $40 million might be obtained. The differences between these amounts are significant in that they should prevent anyone from assuming that $40 million received from the sale of bonds is comparable to the same amount spread over a period of time in equal annual install- ments.

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