Sec. 7] VALUE OF CAPITAL 215

Rares oF INTEREST

(reckoned semi-annually) realized on a bond (with semi-annual coupons)

 known as a
Five per cent bond”

 

 

| YEARS TO MATURITY
PRICE T I

 

 

 

1 | 2 3 { 5 10 20 30 50
:
140 | 25 1 30 | 34
130 17: 30] Cae
120 2.7. .86 1 39 judd
110 16 | 28 | 38 | 43 | 44 | 45
105 2a | 32°] 80 | 44 {eo ay] 47

103 2.0 3.4 3.9 4.3 4.6 4.8 4.8 4.8
102 3.0 4.0 4.3 4.6 4.8 4.8 4.9 4.9
101 4.0 4.5 4.6 4.8 4.9 4.9 4.9 5.0
100 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
99 6.1 5.5 5.4 5.2 5.1 5.1 5.1 5.1
98 7.1 6.1 5.7 5.5 5.3 5.2 5.1 5.1
97 82 | 6.6 6.1 5.7 5.4 5.2 5.2 5.2

 

 

 

95 77 690 TV o2 | 87 | 54 1 53 |.83
90 | $0 | 74 Lea 159 { 57 °{ 58
80 | 7.9 | 00 {65 1 63

 

 

 

 

 

 

 

immediately after an installment of income. They are
what business men call “ ex-interest” prices, i.e. are devoid
of accrued interest. To use the tables when we have given
the price at any time between two installments of income,
it is necessary first to “strip” this price of the interest
accrued since the last installment of income.
It may be asked, Where is the line of demarcation between
 what are nominally “principal” and “interest” ?
The answer is: None at all of any logical importance.
In our calculations all the items receivable from the bond,
including the principal when paid, have been treated on
the same basis. They are, with respect to the bond, its
true “income.” The so-called © principal” is usually regarded
 as a repayment of the original investment. Approximately,
 the original investment and final © principa ”
are equal. But whether equal or not they are distinct.