2 6 FOREST VALUATION 



paid for it, he does not realize that a savings bank at 4 per cent 

 might have paid him more for the uninterrupted use of the same 

 capital than his profit amounts to. 



Yet this attitude of investors towards deferred profits is not 

 explained wholly by ignorance. If an investor is in a position to 

 get along without income for a long period, at the end of that 

 time the "loss" of annual income has but little significance 

 and he sees only the accumulated total of his profit. He com- 

 pares this with his original outlay and judges results on that 

 basis. This tends to make him satisfied with a return which in 

 reality represents low rates of interest on such investments. 



43. Influences Determining the "Rate of Interest." The 

 current rate of interest is a price, determined by the demand 

 and supply of money for borrowing purposes. This price or 

 rate has no greater stability than the average prices of other 

 commodities. It fluctuates during the year, and over longer 

 periods, in response to changing economic conditions. Nor is 

 this rate the same for all classes of loans. It varies with the 

 security offered, the length of the period covered by the loan, 

 and the personality of the individuals negotiating it. In spite 

 of these variations, an average rate of interest may be roughly 

 approximated for a given time and place; but this is determined 

 far more closely if the circumstances affecting the particular 

 loan are also known. 



44. The Influence of Personality on the Rate of Interest. 

 Just as prices are the resultant of human opinions interpreting 

 desires or demand and weighing them against efforts or supply, 

 so the rate of interest depends even more completely upon the 

 human character and mind. 



Impatience for income, and preference for present over future 

 income, tends to raise the price the individual will pay for this 

 privilege. Persons who lack foresight, are improvident and 

 are lacking in self-control will borrow at high rates. The same 

 is true of persons who lack capital and are in need of present 

 income. On the other hand, individuals who desire to provide 

 for the future, who possess the power of self-denial and who are 

 already possessed of considerable capital will borrow, if at all, 



