CHOICE OF RATE OF INTEREST. 118 



(3.) TJic sale value, or the price which can be realised by 

 the sale of a property ; if the sale is open to general 

 competition, the sale value becomes the market price, 

 which depends on supply and demand. 



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

 corresponding to the rental, which the property is 

 capable of yielding. This value is ascertained by 

 capitalising the rental according to the formula: — 



Rental X 100 11 X 100 



Capital 



rate per cent. 



It is commonly expressed as "a certain number of years' 

 purchase." 



In determining the value of a forest property, or indeed 

 any other property, all calculations must be made with com- 

 pound interest, as all money, whether principal or interest, is 

 capable of again yielding interest. 



Section II. — Choice of Eate of Interest. 



By rate of interest is understood the proportion between 

 the 3'early interest (/) and the capital (C) which has yielded 

 it, as represented by the formula : — 



Eate of interest = — . 

 C 



By rate per cent, or, shortly, per cent., is understood the 

 yearly interest yielded by a capital of 100 ; hence the per 

 cent. : — 



p = 1 X 100. 



c 



The rate of interest, applicable to an industry, depends on 

 many things, of which the most important are : — 



{(I.) The degree of security of the investment and the 

 safety, with which it yields a return. In a general 

 way, it may be said, that the rate of interest should be 

 inversely proportional to the safety of the investment. 



F.M. I 



