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and such a percentage; in others a guaranteed percentage, with the possibility of more: Originally the sum paid as one hundred pounds in the way of loan to the company (or one hundred pounds in the company's stock) may be actually one hundred pounds, or may be a sum greater or less offered (as at an auction)--greater if the prospects of the company are regarded as good; less if they are not so highly esteemed. After the original capital of the company--in reality the original loan to the company--has been raised, any part of the capital or loan may pass from one hand to another, but always at such price for the nominal possession of each hundred pounds of stock, or each ten pounds (or whatever may be the unit share), as the prospects of the company are held to justify.
Thus a man who holds a certain amount of stock in any company--be it a nation, or a bank, or a railway, or a trade company--may be considered as for the time
Being a man who has nominally lent that sum to the .company, and is to receive interest on it at a fixed rate, but who has in reality paid perhaps more or perhaps less than that nominal value because of the higher or lower degree of prosperity and credit possessed by the company. For example, he may hold 1,000/. stock in a company paying 5 per cent.; but he may have paid, perhaps, 1,331l. for that stock, which is as if he had lent 1,331l. for 50/. interest per annum--that is really for less than 4 per cent. per annum. Or he may have paid, perhaps, only 817/. for the stock, which is as though he had lent 817/. for 50/. interest per annum, or really for more than 6 per cent. per annum. And in passing, we note that, considering any single company, we see at once how definitely a high rate of interest signifies (as the Duke of Wellington used to tell his officers) low security; for, just as the prosperity and credit of a company rises, so does its stock rise in value, and therefore the rate of interest obtained by purchasers of such stock diminishes, and vice versa. We note that, according to this method of treating stock in a company, the interest nominally remains unchanged; but the amount to be paid for the nominal sum of 100/., on which 31., 41., or 5t. (or whatever the nominal rate per cent. may be) is to be paid, varies all the time. It not only varies with actual changes in the prospects of the company, but it varies also as the value of money changes, or as, with the changes in the prospects of other companies, the relative value of the
company alters If, for instance, owing certain
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