INCOME AND CAPITAL

namely, the chance of default. The other tends to lowerit, namely, the chance to use the security as a substitutefor ready cash. In short, we thus rule out, on the onehand, all risky loans, and, on the other, all bank depositssubject to withdrawal on demand, even if accorded someinterest. We have left safe securities of fixed terms notlikely to be transferred or transferred often before ma-turity. Such securities give us the nearest approach topure interest both for short and long periods accordingto the time to maturity.

In this book, I shall usually confine the concept of therate of interest to the rate in a (humanly speaking) safeloan, or other contract implying specific sums payable atone date or set of dates in consideration of repayment atanother date or set of dates. The essentials in this con-cept are (1) definite and assured payments, and (2) defi-nite and assured repayments, and (3) definite dates. Theconcept includes the concept of the rate realized on a safesecurity such as a bond purchased in the market. It is thisthat concerns us in this book. We are not primarily con-cerned with total interest, but with the rate of interest.

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