THE THEORY OF INTEREST

problems of making the best out of one’s investment op-portunities.

In each problem the rival income streams present dif-ferences as to size and shape. They can best be compared

CHART 19

Difference Between the Best and the Next Best Investment Opportunity-in the Cutting of a Forest.

by means of diagrams. Charts 17 to 20 show typicalways in which the income streams may conceivably besubjected to slight variation. The unbroken line in eachcase indicates the income stream chosen, and the dotted

CHART 20

Alternating Investment and Return.

line the next best opportunity, rejected on behalf of theunbroken line. Chart 17 may be taken as applying tothe planting of a crop; Chart 18 to the draining of aswamp; Chart 19 to the cutting of a forest; and Chart20 to the case of alternating costs and returns.

§10. Range of Choice Depends on Interest Rate

Up to this point one complication in the problem ofinterest has been kept in the background. Although thiscomplication does not invalidate any of the principles

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