Ray's New Practical Arithmetic · Arts. 179–180 · Unit 16: Stock Transactions
84. Stock values, gold, and investment income
Goal: Your child finds the cost of stock at a premium or discount, and the yearly income from an investment.
You'll need
- Paper and pencil, or a slate or small whiteboard
What's in the book
Page 216 defines market value, premium and discount (Art. 179) with examples, and page 217 continues with gold problems and Stock Investments (Art. 180). Page 218 has more investment problems. Answers are printed.
The lesson, step by step
Warm-up
Ask: If a $100 share sells for $110, is it above or below its face value? By what per cent?
The idea
The market value of stocks, bonds, and gold is the price at which they sell.
Stock is above par, or at a premium, when it sells for more than the par value; stock is below par, or at a discount, when it sells for less than the par value.
The par value is the base; the premium or discount is the percentage; the market value, the amount or difference.
A note on gold and greenbacks
In 1877 the paper dollar ("greenback") was worth less than a gold dollar. "Gold at 110" meant that $100 in gold cost $110 in paper money. One problem says that in 1864 the greenback was worth only about 36 cents in gold.
Work the book's examples
Bought $8000 in gold at 110, brokerage ⅛%: what did I pay for the gold in currency?
110% + ⅛% = 110⅛% of $8000 = $8810.
If I invest $39900 in 6% bonds, at par, what will be my income?
The income is the annual profit from the investment.
At par, $39900 buys $39900 of bonds; 6% of that is $2394.
Guided practice
Now do the book's next two together: the same $39900 in 6% bonds at 105, then at 95. First find how much par value the money buys ($39900 ÷ 1.05 = $38000), then take 6%. Talk about why the income is less at 105.
Independent practice and check
Your child works a selection of the stock-value and investment problems on pages 216–218. Some need care with fractions like 114¼. The book prints the answer at the end of each problem line. Have your child cover the answers with a strip of paper, work the problem, then slide the strip down to check.
Mental-math wrap-up
Aloud: 10 shares at 95, cost? 5% income on $2000? $1000 bond at 102, cost?
Tip
Treat the gold and bond problems as a window on 1870s money. If they become a slog, do half and move on.