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Southland Times, Issue 1581, 21 May 1872, Page 2

SOUTHLAND BUILDING, LAND, AND INVESTMENT SOCIETY. Sin, — Considerable diversity of opinion prevails among the public on two points of essential concern to members of the above Society, viz., What the real cost to the borrower will be ? and, what rate of interest the investor may expect to receive ? men of business having worked out long calculations with different results, and various fallacious assertions being made, some contending that when the shares are nearly paid up, the rate of interest to the borrower will be 20 per cent., or more, while others say that by some means which they call compound interest, money can be lent at 8 per cent., and yet that profit can accrue to the Society at a much higher rate. Deeming it a pity that a simple matter should be wrapped up in a cloud of obscurity, I venture to offer the following explanation. Assuming, for the sake of argument, that fines, fees, &c, will exactly equal working expenses, all the money pail up on shares being invested at 8 per cent, there would be profit at the rate of 8 per cent., neither more nor less, to divide on such money paid up, whether by those who have borrowed or otherwise, and the cost to the borrower would then be 8 per cent, on the decreasing amount of his debt, because he would be paying 8 per cent, on the full amount borrowed, and receiving 8 per cent, on his repayments. Should fines, fees, &c, be insufficient to cover working expenses and other contingencies, the cost to the borrower would then be at a higher, and the profit to the investor at a loioer, rate than 8 per cent. — Yours, &c, Actuary.