CO129-450 - Acting Governor Claud Severn - 1918 [10-12] — Page 191

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XEMORANDUM BY TREASURER ON SUGGESTION AS TO CONVERSION OF

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STERLING LOAN.

Taking Market price at 70% and the rate of exchange for remittance to London at 3/-, the calculation works out as follows:

£100 nominal @ 70% and exchange 3/- ■ $466.66.

The interest on the £100 i■ £3† @ 3/- - $23,33. Interest on $466,66 € 6% = $28.00.

If it be taken as expedient that the Loan should be extinguished in 1942 the annual contribution to the Sinking Fund for £100 would be £2,7273 (on a 34% basis for 24 years) = @ 3/-, $18.182 and that for the Dollar Loan (1... $466,66) on a 6% basis would be $9.1835.

Therefore as long as the rate stayed at 3/- the total annual contributions would be respectively for £100- $41.512 and for $466.66 $37.1835, or again to the Colony of $4.3285 per annum for every £100,

The total loan outstanding at home is 21,485,733: while the market value of the Sinking Fund on 31st. December next is £227,000.

Now at 70% this market value would extinguish £324,285 nominal value of the above leaving a balance of £1,161,448 to be extinguished by the local loans: which at 3/- exchange and 70% price would come to $5,420,090 or say $5,420,000 as the amount to be floated in Hongkong.

The gain per annum therefore on this amount would be $50,273 but of course this gain increases with a falling exchange provided the original transfer is made at the 3/- rate.

Then this calcuation is compared with the figures pro- -vided in the annual estimates they would appear to be incorrect but the discrepancy is explained when it is remembered that the greater part of the sterling loan, about £1,144,000, was raised only in 1906 and that consequently the 1% rate of contribution

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