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Bonds are

Classified
According
to the Kind
of Security
as Mortgage

14c

If a man who owns a farm or other property is in need of
money he may borrow 60% of its value, give a
promissory note and secure the payment of the
note by giving a mortgage on his property. Similar-
ly, if a corporation desires to borrow funds for the
Bonds and promotion of its business it may give notes secured
by mortgages or liens on the assets of the company
or a part of its assets or it may give promissory notes under the

Debenture

Bonds.

seal of the company.

Bonds.

These notes are usually of $100 denomination and are called bonds. If secured by mort- Interest is gage they are called mortgage bonds, otherwise Paid on they are called debenture bonds. Just as the man who mortgages his farm must pay interest to the man from whom he borrows the money, the corporation must pay interest to the man from whom it borrows money and to whom it gives a bond as evidence of the loan.

In order to facilitate the collection of interest some bonds nave small interest certificates attached. These certificates or small notes specify the time when certain amounts of interest are due and upon or after that date they may be cut off the bond and presented for payment. Usually any bank will cash these certificates, called coupons, for its customers. Bonds bearing coupons are called coupon bonds. Coupon Government bonds are often issued without interest Bonds, Registered coupons. They are made out and registered in the Bonds. name of the owner and are payable to him or his assigns. These bonds are called registered bonds and the interest is sent to the registered owner or to his attorney as it becomes due.

Bonds and stocks are bought and sold in the market in exactly the same way.

News Paper Quotations of bonds for December 22, 1917:

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It will be observed from the bond quotations given above that certain abbreviations are used. Bethlehem Steel 5s. 1936 are bonds bearing 5% interest issued by the Bethlehem Steel Co.

Abbrevia

used in Bond Quotations.

and due in 1936. Central Pacific 1st 4s are bonds bearing 4% interest, secured by a first mortgage, issued by the Central Pacific Railroad. The high and low prices for the tions are day are quoted. Chesapeake & Ohio cv 5s 1946 $100 bonds were bought for $72 or including the brokerage $72. The highest price of these bonds during the day was $73, with brokerage $73. If one buys a 4% bond at $73 he receives 5% on his investment. The variation in the market price of bonds is due to causes similar to those which affect the price of stocks.

Corporation bonds have always been popular. They afford an opportunity for the corporation to borrow money without giving outsiders a vote in the management of the Corporation Bonds are business. As an investment they are popular Often Good because of the certainty of the income. Of course Investment. bonds like stock may be worthless if the company has no assets but if the company has assets its first obligations are to the bondholders who are preferred creditors. The interest on bonds must be paid before dividends can be paid on either preferred or common stock. The bonds pay a small rate of interest as a rule but a company is indeed in a bad state of affairs if it can not pay interest on its bonds.

make very

In addition to the corporation bonds, the kind we have considered thus far, there are bonds issued by states, counties, towns, etc. These bonds are issued for the purpose of financing public improvements and are considered the highest Municipal and Govern- grade of security and the safest possible investment ment Bonds next to government bonds. We are most interested Desirable at the present time in government bonds. When our government desires to undertake some large public work like the building of the Panama Canal it borrows money from the people and issues them interest bearing bonds. In the newspaper quotation of government bonds for December 22, 1917 given below, the Panama Canal 2s 1938 are bonds issued by the United States Government for financing the Panama Canal. They bear 2% interest and are due in 1938.

Investments.

On December 22, 1917 $96 ($4 below par) was bid for a $100 Panama Canal bond.

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of a Govern

In meeting the enormous cost of our war, Congress may tax us directly or the government may borrow money from us and give us as security government bonds upon which The Safety interest is paid. As a rule national government ment Bond bonds are the safest of investments and for that Depends reason pay a low rate of interest. The safety of a Stability of government bond depends upon the stability of the of the government. At the present time (December, 1917) ment. one would scarcely care to invest in bonds issued by the Bolsheviki government of Russia.

upon the

Govern

The following clippings from the "Official Bulletin" published by the National Committee of Public Information give first hand information concerning the safety of government Liberty Bonds: GOVERNMENT BONDS RANK HIGHEST OF ALL SECURITIES.

In connection with the liberty-loan campaign, the publicity department explains that, in a very general way, bonds are divided into five different classes:

1. Government.-A Government bond is issued by the National Government. It is secured by the wealth and taxing

power of the country issuing the bond and is issued to provide funds for the maintenance of the Government, to equip the army Government and navy, build waterways and public works of all Bonds Rank sorts, and in times of war to provide for increased Highest needs.

of all Security.

2. Municipal.-A municipal bond is issued by a city, town, or village. These bonds are issued to get money for building schoolhouses, waterworks, sidewalks, fire-department stations, or other public improvements voted by the municipality.

3. Railroad.-Railroad bonds are subdivided into too many classes to be gone into briefly. They are issued by a railroad company to build new lines, buy cars and engines, and to keep the roads in good condition.

4. Public utility.- Public utility bonds are issued by corporations owning and maintaining public-service utilities-gas, electric light, street railways, and other such service required by the public and not owned by the city in which they are located.

5. Industrial.-Industrial bonds are issued, as the name implies, by corporations manufacturing on a large scale various sorts of products. Under this class come the bonds of steel companies and other big industries.

Necessity requires a briefness which does not permit further subdivisions of these five headings. Government bonds as a class rank highest in market value. The bonds of our Government have a higher rank than those of any other country because the credit of the United States is now the highest of all civilized countries.

HOW THE UNITED STATES LIBERTY BONDS MEET ALL THE ESSENTIALS OF A GOOD INVESTMENT.

The publicity bureau of the second Liberty loan, Treasury Department, authorizes the following concerning the bond issue:

1. Security of principal.-The wealth of the United States is back of the bonds issued by the Government. Since the present organization of the United States in 1790 no debts have ever

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