Gallipolis journal. [volume] (Gallipolis, Ohio) 1837-1919, 1869-05-13

seven years, 3 81 90
Interest on $3.50 for I yrs.
at 6 per cent, 63 0O
Initiation Fee, 90
Total paid in yrs, 154 25
Amt reed for his stock, $50 90
Difference, 81 25
Which, as will be seen, would cause
himto pay just "a e5 for the use ofsl5O
fol. seven years-or fraction over go
cents per year. A very low interest,
surely.
Now, let us suppose that the man
who received this money had little
piece of property on which he owed
$3.50, and was paying 10 per cent. in
terest, which he certainly would pay
if he borrowed money in the ordinary
way. The interest on this sum, then,
outside of the association, would cost
him SIS per year, or SI05 in seven
years. Thus, by being member of
the association, and getting his money
from it, it will be seen that, on a debt
of $3.50, he would save each year in
interest, S14.40, or S100.80 in seven
years--and at the end of that time,
have no principal to pay.
But let us suppose that the man who
received this money did not owe any
thing, but merely sold his stock in or
der to get money to speculate with
How would it affect him? He could
turn right around and invest his $3.50,
in various ways, at 10per cent. inter-
est, which would yield him, as stated
above. Sl05, at simple interest, alone
Deduct from this the "a 25 that he
would have to pay to the association
for the use of the money, and it.would
leave him clear profitof SI0O.75. Or,
in other words, his $3.50, cash in hand,
with which to speculate with, has cost
him but $40 95 in seven years.
In the calculation given above, we
have assumed seven years as the time
taken to wind the association up-that
is, to accumulate money sufficient to
pay the face of the stock to all those
who hold on to it. But if the associa-
ton is successful. and the money tax
en- in is disposed ofrapidly, it might
wind itself up in FIVE years--possibly
less-in which case those who sold
their stock would have two years less
dues and interest to pay, and would be
benefited in proportion.
HOW DOES IT PAY OTHERS.
But, say many, if it pays the man so
well who sells his stock, how does it
pay those who hold on? Simply by
eompounding interest. The interest on
all sums received is payable monthly.
This money received as interest, is
again re-loaned, and the operation kept
up each succeeding month, and if any
one will take the trouble to figure out
the interest on FIVE, ten or fifty dollars,
at this rate, for seven years, they will
discover the method by which money
is so rapidly accumulated, wherewith
to pay the face of the stock of those
who hold on to it.
To illustrate the benefit to those who re-
tain their stock, we will suppose the
case of member who has ten shares
of stock, $4,000 worth. Presuming it
will take the association seven years to
wind up, he will pay, in that time, be-
side his initiation fee, the sum of 1910
in dues, at the rate of So 50per week.
He will then receive, in lump, the face
of his stock-S9, ,O0O-being $1,000
more than he has paid in in seven
years, in small instalments. If the as
sociation winds up in less time, his
profits would be proportionately greater.
THE WINDING UP.
An association is said to pay itself
out, or wind up, whenever there is
money enough in the treasury to re-
deem all the stock unsold, at its par
value. Every time man sells share
of his stock to the association, as des-
cribed above, there is that much stock
Cancelled, and there is so much less to
redeem. In such associations, the
great majority of the members sell
their stock early in order to get the use
of the money at once. This process of
buying in the stock of all those who
will sell keeps on until the dues and in
terest received amounts to enough as
stated above, to pay the full face of
the stock to those who will not sell.
This being done, the partnership is dis
association wound up. 1t
will thus be seen that the more rapid
ly the members sell their stock, or the
more rapidly they borrow money, as it
is termed-the sooner the association
pays itself out, and the more profitable
it is for all parties.
The above, we think, sets forth the
main points in the case in manner
that can be comprehended by all.
There are minor questions connected
with their workings which we have not
.ouched upon, but these are not of ma
terial moment.