Premium on $5000 for 20 years is 20 × $234 = $4680. By most policies issued now, I would receive a small rebate each year after the first or second, called "participating in the dividends." PROBLEM: Mr. Garvin took out a policy for $2000 at the age of 32. His semi-annual premium was $24.90 per $1000. In 3 years he died. How much more did his beneficiary receive than he had paid the company? WORK AND EXPLANATION: Annual premium on $1000 is 2 × $24.90 = $49.80. Annual premium on $2000 is 2 x $49.80 = $99.60. Premium on $2000 for 3 years is 3 × $99.60 = $298.80. $2000 $298.80 = $1701.20. = ANNUITIES. Annuity policies are usually secured by a single cash premium, and insure the holder a specified sum each year for life. This may be made in quarterly or semi-annual payments. Perpetual annuities are those that continue for ever. Contingent annuities depend on the happening of some contingency, as the death of the individual. Annuities in arrears are those on which payments are unpaid after they become due. Annuities in reversion are those that begin at some future time. Certain annuities begin and terminate at specified times. The present value of an annuity is the sum which at compound interest will amount to its final value. The final value of an annuity is the sum to which all its payments at compound interest will amount at the termination of the annuity. ANNUITY TABLE. Showing the present value of an annual anuity of $1 from 1 to 40 years at 31% and 4%, compound interest. 1. Find the present value of an annuity for ten years of $700 at 31%. SOLUTION: By the table the present value of $1 for 10 yr. at 31% is $8.31661. The present value of $700 is 700 × $8.31661, or $5821.63. 2. What is the present value of an annuity of $300 for 4 yr. at 4% ? SOLUTION: By the table the present value of $1 for 4 yr. at 4% is $3.6299. The present value of $300 is 300 × $3.6299, or $1088.97, 3. The present value of an annuity for 20 yr. at 4% is $2718.07. What is the annuity? SOLUTION: The present value of $1 for 20 yr. at 4% is $13.59033. Then $2718.07 is the present value of as many dollars as 13.59033 is contained times in $2718.07, or $200. NOTE.- For computations on life annuities, carefully prepared tables are used. These tables show the average expectancy of life for anyone from 1 yr. up. They are based upon the average death rate through a long period of years. One of the most famous of these tables is known as the Carlisle Table, because based on the average for a period of years at Carlisle, England. STOCKS AND BONDS. TALK: Work in stocks and bonds is difficult for most students chiefly because the terms used are not made clear. Then, too, most pupils have no knowledge of the way a corporation is formed, nor why it is so organized. If the teacher will become a little familiar with the subject, a simple, clear statement of the points to be considered will help the pupils greatly. Use actual shares of stock for illustration, if they can be procured. Do the same with bonds and their interest coupons. If real ones cannot be procured, do the next best thing by using the illustrations of these papers that are given here. This subject, like some others given in these later pages, should not consume too much of the student's time. The practical value, to most pupils, is very limited. Explain how, in order to carry on many business enterprises, two or more men put their money together and each shares the profits or losses in proportion to the money he has put into the business. Tell how corporations are formed with a certain number of thousands of dollars of capital stock. Every $50 or $100 of capital stock is represented by a certificate called one or as many shares of stock as is indicated on it. These shares are bought by individuals, who are then said to hold stock in the company to the amount represented in the shares they hold. The money received from the sale of these shares is used to do the business of the company. A corporation is an organization of people authorized by law to do business as one person. Stock is the capital of the corporation. It is represented by shares in certificate form, each certify. ing that the person named therein holds the specified number of shares of stock. A share is one of the equal parts into which the capital stock is divided. In most companies the value of a share is $100. A certificate of stock is a written paper signed by the proper officers of the corporation, naming the number of shares to which the person named therein is entitled, and the original value of the same. The par value of a share of stock is the value named in the certificate of stock. When a corporation is prosperous, its shares of stock often sell for more than the value named in the certificate of stock. They are then said to be above par, or at a premium. In times of business depression, often these shares of stock sell below their face value. They are then said to be below par, or at a discount. The market value of a share of stock is the value for which it sells in the open market. A stock broker is one who makes a business of buying and selling stocks and bonds. He charges a commission for this which is called brokerage. A surplus is a part of the earnings of a corpora |