Hence the possibility
of profit when francs return to normal is large.
The National French Loan was sold to American investors at an exchange
rate of 5.90, which means that every dollar you employ gives you a
principal of 5.90 francs. On this basis the price for the security
issued at a par of 100 would be 871/2, which would make the direct
yield over 5.70 per cent. Should exchange return to normal, the
subscription price would be equivalent to 751/2, which would make the
direct yield over 6-5/8 per cent.
Translating this loan into terms of money, you find that for every
$14.83 you invest you get 100 francs capital: for every $148.30 you get
1000 francs capital: for $741.52 you receive 5000 francs capital. If
French exchange should return to normal and the securities sell at the
issue price--871/2--the investor would receive $16.89 for every 100 francs
of capital: $168.88 for every 1000 francs: $844.39 for every 5000
francs. On this basis without regard to income return the holder of 5000
francs capital would receive a profit of $103.94 or over 13.75 per cent
on his investment.
Should the market price of the issue advance to 100 and exchange return
to normal the investor would get $19.30 for every 100 francs capital;
$193.00 for every 1000 francs capital; $965.00 for every 5000 francs
capital. In this case and again without regard to income return, the
holder of 5000 francs capital would receive a net profit of $223.
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