30 BULLETIN 1224, U. S. DEPARTMENT OF AGRICULTURE. 
Table 10. — Component parts of land value and the relations between them. 
1 
2 
3 
4 
5 
6 
7 
Group. 
V 
a 
i 
r 
a 
V 
r 2 
V 
Per cent. 
Per cent. 
Per cent. 
7 
$160 
$5.39 
$0.23 
5.8 
3.4 
42 
9 
164 
4.58 
.21 
5.2 
2.8 
46 
10 
225 
5.47 
.38 
5.5 
2.4 
.56 
14 
128 
2.82 
.27 
5.8 
2.2 
62 
25 
143 
3.72 
.32 
6.2 
2.6 
58 
26 
150 
6.99 
.17 
6.4 
4.7 
27 
37 
98 
6.34 
.03 
6.9 
6. 5 
6 
42 
30 
1.14 
.06 
6.9 
3.8 
45 
46 
66 
3.91 
.07 
7.3 
5.9 
19 
In this table r, the mortgage rate of interest, was taken from 
Volume VI of the 1920 agricultural census. It is an average of the 
county rates for each group. The values of i were obtained by solv- 
ing the formula for i. 13 Since i is obtained in this way, its accuracy 
depends upon the accuracy of the data from which it is derived. In 
all the groups except those hung in the Cotton Belt these data are 
believed to be accurate. 
This table then opens the way to a complete understanding of why 
the ratios of rent to value were what they were in 1920, and why 
there was so much variation in them from district to district. In the 
eastern part of the Corn Belt (group 7) the ratio of rent to value is 
3.4 per cent, while in the western part of the Corn Belt (group 10) 
it is only 2.4 per cent. The lower ratio in group 10 is explained, in 
part, by the lower interest rate prevailing there, but the difference in 
the interest rates is small and would account for only a small difference 
in the ratios. Most of the difference in these ratios is accounted for 
by the fact that i is only $0.23 in group 7, while it is $0.38 in group 10. 
In other words, the buyers and sellers of land in group 10 bought and 
sold land in 1920 on the assumption that it would increase thereafter 
at the rate of $0.38 per acre a year, while in group 7 they bought and 
sold land on the assumption that it would increase at a rate of only 
$0.23 a year, or $0.15 a year less than the anticipated increase in 
group 10. This means that in group 10, where the average value of 
land was $225 an acre, $126 or 56 per cent of the value was based upon 
this anticipated increase in income, while in group 7, where the average 
value was $160 an acre, only $67 or 42 per cent of the value was based 
upon the anticipated increases in income. The ratios of rent to 
value for the other groups are to be interpreted in the same way. 
In group 14 the anticipated increase in income is shown to be rela- 
tively large. This is explained by the fact that the counties in the 
northern part of this group are underimproved. That is, the land in 
farms which the farmers in this area think it is economically profitable 
to clear has not all been cleared, so that the value is based upon 
income which these lands are expected to yield when they are brought 
up to their proper state of improvement, while they rent on the basis 
of their present state of improvement. 
I s Solving the formula V=—+— 2 for i gives 
j== Vr*-ar. 
