CHOICE OF RATE OF INTEREST. 115 



(3) The sale value, or the price which can be realized by 



the sale of a property ; if the sale is open to com- 

 petition, the sale value becomes the market price, 

 which depends on supply and demand. 



(4) The rental value, by which is understood the capital 



which corresponds to the rental which the property 

 is capable of yielding. This value is ascertained by 

 capitalizing the rental according to the formula 



,. , KentalxlOO 72x100 



Capital = = - . 



rate per cent. p 



In determining the value of a forest property, or indeed any 

 other property, all calculations must be made with compound 

 interest, as all- money, whether principal or interest, is capable 

 of again yielding interest. 



SECTION II. CHOICE OF KATE OF INTEREST. 



By rate of interest is understood the proportion between the 

 yearly interest (I) and the capital (Cy which has yielded it, as 

 represented by the formula 



Bate of interest = -. 



G t * 



By rate per cent, or, shortly, per cent., is Understood the yearly 

 interest yielded by a capital of 100 ; hence the per cent. : 



p=IxlOO. 



c 



The rate of interest which is applicable to an industry 

 depends on many things, of which the most important are : 



(a) The degree of security of the investment and the safety 

 with which it }ields a return. In a general way it 

 may be said that the rate of interest is inversely 

 proportional to the safety of the investment. 



(6) The supply and demand of capital, which changes from 

 time to time, and with the locality. 



(c) The general credit of the country in which the industry 



I 2 



