The Bridgeport evening farmer., 1917-12-07
LIBERTY BOND
 LESSONS
 By HOWARD STEER
 Of Hincks Bros. & Co.
 LESSON NO. 12 Adjustment of Interest 

fore Nov. 15, 1917 without any "ad- justment of interest" and that there would be another such opportunity on December 15. We promised to ex- plain that phrase "adjustment of in- terest," and we shall do so at this time.
 If man owes you six dollars and hands you a ten dollar bill to pay his debt you have to give him four dol lars to balance the account.
 Now an adjustment of interest is just a case of making change. A cou- pon bond consists of two main parts first, a sheet of paper called the face of the bond and second, one or more sheets of little coupons, each one of which is good for six months inter est.
 Now suppose a man buys a certain bond, with coupons coming due on the first days of January and July. He holds this bond for a few years, collecting his interest regularly, and then some year around the first of March he needs some money and sells his bond. He gets certain price for it, but what fs he going to do about the interest on his money for the months of January and Febru- ary? Of course, he can cut that little coupon into two pieces of different sizes, but the trouble is the banks won't take a piece of a coupon. They insist on having the whole coupon or none at all
 The only fair way out of the diff culty, therefore, is for the man who buys the bond to pay over to the sell CT the amount of interest which his money has earned during those two months He then receives the bond with all of the unmatured coupons at tached, including the one which comes due in July of that year. On the first day of July he cuts off the coupon and collects full six months interest, thus receiving back the two months interest which he advanced to the other man, and also having re- ceived interest for the entire four months during which his money has been invested in that bond.
 In other words, he has just made change. And the government will ex- pect you to make change in a similar way if you convert your 3 1-3 per cent. bond into 4 per cent. bond unless you do it on December 15 next. You need not make an adjustment of interest on that date for the follow ing reason.
 The law under which the per cent. Liberty Bonds were issued pro- vided that they should be dated Nov. I15, 1917 and should bear interest at per cent. from that date. In order, | therefore, to make conversion as sim pie as possible, the government has prepared a special coupon to repre- sent the first interest payment which will be made on December 15 next on the per cent. bonds which a per- son gets in exchange for his 1-2 per cent. bonds. This coupon will be diff ferent from all the others which are attached to the bond. It will be for an amount of money representing 8 1-2 per cent. from June 15, 1917 up to Nov. 15, 1917, and per cent. interest from Nov. Is, 1917 to Dec, 1 15, 1917.
 Now on Dec. 15 the coupon on the original 1-2 per cent. bond will fall due, and also that queer coupon on the per cent. bond which you get in exchange will fall due. One who converts on that date, therefore, will simply cut the first coupon from his 1-2 per cent. bond and cash it, turn ing in to the government the bond with all the rest of the coupons at- tached. He will receive from the government per cent. bond from which the first coupon has likewise been cut, so that the next coupon which he will be able to cut from his new 4 per cent. bond will be the one which falls due on June 15, 1913. Now if you want to convert some time between today and December 15, 1917 you will have to pay the gov ernment the difference between inter- est at per cent. and interest at 8 1-2 per cent. from November 15 to the day on which you decide to convert
 For example, suppose you decide to convert on December 13. You will
 have to pay the government 2S days
 interest. This interest will amount
 to 3Sc on a $1.oo0 bond; 1sc on g $500 bond; 4c on $100 bond and
 Pc on $50 bond.
 In this way you will be treated ab.
 solutely fair. Your money will have
 been working for you at 3 1-2 pel
 cent up to the day you convert, and
 at 4 per cent. from then on. In order
 however, for you to receive this ab. solutely correct adjustment of wha1
 is due to you it will be necessary fol
 you to make actual request for an ex. act adjustment of interest, such re.
 quest to be on printed form pre-
 pared by the government. If you dt
 not make such a request the bond
 which the government will give yor
 will have as it's first coupon one which
 bears only 1-2 per cent for the ful
 6 months from June 15, 1917 to Dec
 15, 1917. After Dec. 15, 1917 the cou lpons will, of course, all be at the rate
 of 46per cent.
 We have not yet discussed convef
 sicn after December 15, 1917. Sup
 pose you decide to convert on tnt first day of next March. Your none. will have been invested in a l.: per cent. bond up till that date, ant
 will be entitled to interest at 8 l.: per cent. from December 15, 1917 tc the day on which you convert. Aftel
 that you will be entitled to interes
 at per cent. Remember, however
 that the bond which the governmen
 will give you on March will hay, fattached to it a coupon representing
 full six months interest at per cent from December 15, 1917 to June 15
 1918. You will not. however, be en
 titled to this full six months interes at per cent. You must therefor,
 pay to the government the differenc,
 between 4 per cent. interest and l..
 per cent. interest from December Il up to March 1. In other words, ther, l.<. 4oix