The Daily state journal. [volume] (Alexandria, Va.) 1868-1874, 1874-02-05
HERE Is THE PROBLEM


yored few who control ii to multiply thei
capital M 1851
HERE IS THE PROBLEM
A company has obtained a charter, un.
der the law of 1870, to establish a national
bank, with nominal capital Of 81 ,OOO, 900.
II wishes to obtain 81 ,000, 900 in United
States bonds to deposit in the United States
Treasury, and to obtain therefrom 80 per
cent. OF this amount in national bank cur
/. rency, as provided by law; how much
money must it expend for this purpose out
OF its own resources, provided bonds are
worth premium of Is per cent. in cur
q rency, and provided it purchases its bonds
IN ten lots OF 100000 each, and draws its
$9O, of currency on the first lot before
purchasing the second, on the second be-
fore purchasing the third, and so on to the
end ? G
Those who prefer to solve the problem
for themselves may here lay aside The
: Critic and take up their slate and pencil,
but for the benefit Of such as are no.
automatically inclined. we here present
the
Pa7 SOLUTION
Bonds being worth premium of Is per
cent, each 100000 in bonds will cost
$4,000 in currency. But in making the
second purchase the company may use the
$4,000 in currency obtained from the
Treasury on deposting the first lot of
bonds; IN making the third purchase. it
may use the 100000 obtained on deposit
ing the second lot Of bonds, and SO on to
the tenth purchase, in making which it
may use the $780, 900 obtained on deposit
lnn tha Mi, tot ri IA e.
then, that to purchase the first 500, 900
. IN bonds, the company will have to use
Sll0,OOO OF its own money and on purchas-
ing the nine subsequent lots, it will have
to use SIC, 900 of its own money, which,
added to the 100000 obtained from The
treasury, will make the requisite $l15. 900.
But nine times $25 900 is 1925, 900. and
this amount, plus the $1l5,OOO required
for the first purchase, makes s346 900. |
which is therefore the amount OF its own
money which the company will have to
use in purchasing 81, 000, 900 in bonds and
obtaining 100000 from the treasury in
currency. OF this 5000, 900 in currency
it will have expended all except tie
$4,000 obtained on depositing the
last lot of bonds, and conse-
quently will have, at the close Of its series
" OpSAo-touo9 PABoOO,oVo Ill JULIUS Oh u6s |
post in the treasury and 100000 cash in
hand as the result of expendng $340, 900 of |
its own money. In addition to this. 1t |
will havcto keep a reserve of greenbacks |
equal to fifteen or twenty-five per cent. of |
its circulation, according as it happens to
be located in a country town or in one
of the redemption cities. In the former
case its reserve will be $4,000, which.
added to the $4,000 expended, would
make total of SAFE, 700, expended and
employed as reserve together.
AS interest on this sum it will receive.
first. $50, 900 year in gold on the bonds
deposited in the Treasury (since, excluding
accrued interest from their market price.
six per cent. bonds can be purchased at
the price namedD second, it will have the
interest on the 1000 of cash on hand at
the close Of its operations, as above de-
scribed, which it can readily lend to Gus
toners on good security at seven per cent.
But $4,000 in gold at present rates is
equal to about 100000 in currency. and
seven per cent, on 100000 amounts to
So 300, so that the annual interest obtained
by the company by an Investment of
$475,O0O of their own money will be
$73 200, which is at the rate of more than
fifteen per cent. per dn',atna.