NATURE OF CAPITAL AND INCOME [Cuar. XVI

§13

The discount curves just employed are assumed to be the
same as those employed formerly in the discussion of certain
prospective income. But, as a matter of fact, chance. will
have an effect even on discount curves. For the increase of
capital-value along a discount curve is due to the approach
of expected income, and this approach, in the case of uncertain
 income, is quite different from what it is in the case of
certain income. It is only as the owner has a conviction
that he is nearing the time when income will be received,
that the capital-value will increase at all. This will be true
of dividends for the declaration of which there are definitely
 appointed times; but if the times for the installments
 of income are wholly fortuitous, the capital-value
will not increase and instead of a discount curve, we
shall have a horizontal line.. If a piano dealer is asked
to value a particular piano in his stock, he will not add
interest because it had been in his stock a long time.
Tt is impossible for him to say which individual piano will
be sold next, and the mere fact that a particular piano has
stood for a long time in his store will offer no assurance that
it will be sold earlier than the others. Therefore the value of
the piano will not advance with time, but will remain nearly
at the wholesale price. In the same way, a stock of money
which a man carries as cash does not advance in value by
lying in his pocket. For although the services which it will
render to its owner are actually approaching, their exact
time of occurrence is not known, but is subject to chance.
Tt is chiefly in the case of bonds and stocks, where there
are definite times for the occurrence of income, that the
actual value ascends strictly along the discount curve.
In the case of shares of stock if the stockholder fears that
a dividend will be small, the value of the stock will only
slowly increase as the time for the dividend approaches.
Tt will follow a discount curve, but one which climbs toward