APPENDIX TO CHAPTER XIII 381

discount on this $25 is shown by the line B.D, which is therefore
 the premium in the selling price of the bond. The total
price is AB+ BD =AD. The price at later dates (taken
each just before an installment) is represented by points on

 

 

 

 

Cc ct
5 25
D 5
BF---=-, a momo =o of 8
Dp
100

 

 

BB CF cis js) Eies Hs
A A

Fic. 42.

 

the discount curve DB' drawn with reference to CC' as a
horizontal axis. Adding at each of these installment points a
line equal to $5, we have the value just before interest payments,
 and connecting the tops of these lines with the preceding
interest intervals by discount curves reckoned at 4 9%, we have
a series of teeth representing the normal course of the price of
the bond from the present to maturity.
In case a bond is sold at a 69 basis, we have the curve B'D),
instead of B'D, with the teeth superimposed as before, the
tooth curves, however, being in this case on a 6% slope.