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Description

Business managers will gain a basic understanding of the complex world of

finance with this engaging book. It presents a balanced survey of the three main
areas of finance: institutions and markets, investments, and financial
management. The examples have been completely updated throughout to
provide the most relevant information. Discussions of small business practice help
them gain a better understanding of small business applications. More focus is
placed on ethics to reflect the headlines in today's news. Additional end-of-
chapter questions and career-profile features also enable business managers to
connect the material to the real world.

Table of contents

1. Copyright

2. PREFACE

1. LEARNING AND TEACHING AIDS

2. ACKNOWLEDGMENTS

3. AUTHOR BIOS

4. 1. INSTITUTIONS AND MARKETS

1. 1. The Financial Environment

1. 1.1. WHAT IS FINANCE?

1. 1.1.1. TWO THEMES

2. 1.2. WHY STUDY FINANCE?

3. 1.3. SIX PRINCIPLES OF FINANCE

1. 1.3.1. TIME VALUE OF MONEY

2. 1.3.2. RISK VERSUS RETURN

3. 1.3.3. DIVERSIFICATION OF RISK

4. 1.3.4. FINANCIAL MARKETS ARE EFFICIENT

5. 1.3.5. MANAGEMENT VERSUS OWNER OBJECTIVES

6. 1.3.6. REPUTATION MATTERS

4. 1.4. OVERVIEW OF THE FINANCIAL SYSTEM

1. 1.4.1. CHARACTERISTICS AND REQUIREMENTS

2. 1.4.2. FINANCIAL SYSTEM COMPONENTS AND

FINANCIAL FUNCTIONS

1. 1.4.2.1. Creating Money

2. 1.4.2.2. Transferring Money

3. 1.4.2.3. Accumulating Savings

4. 1.4.2.4. Lending and Investing Savings

5. 1.4.2.5. Marketing Financial Assets

6. 1.4.2.6. Transferring Financial Assets

5. 1.5. FINANCIAL MARKETS CHARACTERISTICS

 1. 1.5.1. MONEY AND CAPITAL MARKETS

2. 1.5.2. PRIMARY AND SECONDARY MARKETS

6. 1.6. MAJOR TYPES OF FINANCIAL MARKETS

7. 1.7. MORTGAGE MARKETS

1. 1.7.1. TYPES OF MORTGAGES AND MORTGAGE-BACKED

SECURITIES

2. 1.7.2. CREDIT RATINGS AND SCORES

3. 1.7.3. MAJOR PARTICIPANTS IN THE SECONDARY

MORTGAGE MARKETS

8. 1.8. THE 2007–09 FINANCIAL CRISIS

9. 1.9. CAREERS IN FINANCE

10.1.10. THE PLAN OF STUDY

11.1.11. SUMMARY

12.1.12. KEY TERMS

13.1.13. DISCUSSION QUESTIONS

14.1.14. EXERCISES

2. 2. Money and the Monetary System

1. 2.1. PROCESS OF MOVING SAVINGS INTO INVESTMENTS

2. 2.2. OVERVIEW OF THE MONETARY SYSTEM

3. 2.3. IMPORTANCE AND FUNCTIONS OF MONEY

 4. 2.4. DEVELOPMENT OF MONEY IN THE UNITED STATES

1. 2.4.1. PHYSICAL MONEY (COIN AND PAPER CURRENCY)

1. 2.4.1.1. U.S. Coins

2. 2.4.1.2. Paper Currency

2. 2.4.2. DEPOSIT MONEY

5. 2.5. MONEY MARKET SECURITIES

6. 2.6. MEASURES OF THE U.S. MONEY SUPPLY

1. 2.6.1. M1 MONEY SUPPLY

2. 2.6.2. M2 MONEY SUPPLY

3. 2.6.3. M3 MONEY SUPPLY

4. 2.6.4. EXCLUSIONS FROM THE MONEY SUPPLY

7. 2.7. MONEY SUPPLY AND ECONOMIC ACTIVITY

8. 2.8. INTERNATIONAL MONETARY SYSTEM

9. 2.9. SUMMARY

10.2.10. KEY TERMS

11.2.11. DISCUSSION QUESTIONS

12.2.12. EXERCISES

13.2.13. PROBLEMS

3. 3. Banks and Other Financial Institutions

1. 3.1. TYPES AND ROLES OF FINANCIAL INSTITUTIONS

1. 3.1.1. DEPOSITORY INSTITUTIONS

2. 3.1.2. CONTRACTUAL SAVINGS ORGANIZATIONS

3. 3.1.3. SECURITIES FIRMS

4. 3.1.4. FINANCE FIRMS

2. 3.2. OVERVIEW OF THE BANKING SYSTEM

1. 3.2.1. COMMERCIAL, INVESTMENT, AND UNIVERSAL

BANKING

2. 3.2.2. FUNCTIONS OF BANKS AND THE BANKING SYSTEM

3. 3.3. HISTORICAL DEVELOPMENT OF THE U.S. BANKING SYSTEM

1. 3.3.1. BEFORE THE CIVIL WAR

1. 3.3.1.1. Early Chartered Banks

2. 3.3.1.2. First Bank of the United States

3. 3.3.1.3. Second Bank of the United States

4. 3.3.1.4. State Banks from 1836 to the Civil War

2. 3.3.2. ENTRY OF THRIFT INSTITUTIONS

4. 3.4. REGULATION OF THE BANKING SYSTEM

1. 3.4.1. GENERAL BANKING LEGISLATION

1. 3.4.1.1. National Banking Act of 1864

 2. 3.4.1.2. Federal Reserve Act of 1913

3. 3.4.1.3. Depository Institutions Deregulation and

Monetary Control Act of 1980

4. 3.4.1.4. Depository Institutions Deregulation

5. 3.4.1.5. Monetary Control

6. 3.4.1.6. Garn–St. Germain Depository Institutions

Act of 1982

2. 3.4.2. THE SAVINGS AND LOAN CRISIS

3. 3.4.3. PROTECTION OF DEPOSITORS' FUNDS

5. 3.5. STRUCTURE OF BANKS

1. 3.5.1. BANK CHARTERS

2. 3.5.2. DEGREE OF BRANCH BANKING

3. 3.5.3. BANK HOLDING COMPANIES

6. 3.6. THE BANK BALANCE SHEET

1. 3.6.1. ASSETS

1. 3.6.1.1. Cash and Balances Due from Depository

Institutions

2. 3.6.1.2. Securities

3. 3.6.1.3. Loans

4. 3.6.1.4. Other Bank Assets

 2. 3.6.2. LIABILITIES AND OWNERS' CAPITAL

1. 3.6.2.1. Deposits

2. 3.6.2.2. Other Liabilities

3. 3.6.2.3. Owners' Capital

7. 3.7. BANK MANAGEMENT

1. 3.7.1. LIQUIDITY MANAGEMENT

1. 3.7.1.1. Asset Management

2. 3.7.1.2. Liability Management

2. 3.7.2. CAPITAL MANAGEMENT

3. 3.7.3. 2007–09 FINANCIAL CRISIS

8. 3.8. INTERNATIONAL BANKING AND FOREIGN SYSTEMS

9. 3.9. SUMMARY

10.3.10. KEY TERMS

11.3.11. DISCUSSION QUESTIONS

12.3.12. EXERCISES

13.3.13. PROBLEMS

4. 4. Federal Reserve System

1. 4.1. THE U.S. BANKING SYSTEM PRIOR TO THE FED

 1. 4.1.1. WEAKNESSES OF THE NATIONAL BANKING
SYSTEM

2. 4.1.2. THE MOVEMENT TO CENTRAL BANKING

2. 4.2. STRUCTURE OF THE FEDERAL RESERVE SYSTEM

1. 4.2.1. MEMBER BANKS

2. 4.2.2. FEDERAL RESERVE DISTRICT BANKS

1. 4.2.2.1. Directors and Officers

2. 4.2.2.2. Federal Reserve Branch Banks

3. 4.2.3. BOARD OF GOVERNORS

4. 4.2.4. FEDERAL OPEN MARKET COMMITTEE

5. 4.2.5. ADVISORY COMMITTEES

6. 4.2.6. ROLE OF THE CHAIR OF THE FED BOARD OF

GOVERNORS

3. 4.3. MONETARY POLICY FUNCTIONS AND INSTRUMENTS

1. 4.3.1. OVERVIEW OF RESPONSIBILITIES

2. 4.3.2. RESERVE REQUIREMENTS

3. 4.3.3. DISCOUNT RATE POLICY

4. 4.3.4. OPEN-MARKET OPERATIONS

5. 4.3.5. IMPLEMENTATION OF MONETARY POLICY

4. 4.4. FED SUPERVISORY AND REGULATORY FUNCTIONS

 1. 4.4.1. SPECIFIC SUPERVISORY RESPONSIBILITIES

2. 4.4.2. SPECIFIC REGULATORY RESPONSIBILITIES

5. 4.5. FED SERVICE FUNCTIONS

1. 4.5.1. THE PAYMENTS MECHANISM

1. 4.5.1.1. Coin and Currency

2. 4.5.1.2. Check Clearance and Collection

3. 4.5.1.3. Check Clearance among Federal Reserve

Districts

4. 4.5.1.4. Check Clearance through Federal Reserve

Branch Banks

5. 4.5.1.5. Check Routing

2. 4.5.2. TRANSFER OF CREDIT

3. 4.5.3. OTHER SERVICE ACTIVITIES

6. 4.6. CENTRAL BANKS IN OTHER COUNTRIES

7. 4.7. SUMMARY

8. 4.8. KEY TERMS

9. 4.9. DISCUSSION QUESTIONS

10.4.10. EXERCISES

11.4.11. PROBLEMS

5. 5. Policy Makers and the Money Supply

1. 5.1. NATIONAL ECONOMIC POLICY OBJECTIVES

1. 5.1.1. ECONOMIC GROWTH

2. 5.1.2. HIGH EMPLOYMENT

3. 5.1.3. PRICE STABILITY

4. 5.1.4. BALANCE IN INTERNATIONAL TRANSACTIONS

5. 5.1.5. THE PERFECT FINANCIAL STORM

2. 5.2. FOUR POLICY MAKER GROUPS

1. 5.2.1. ETHICAL BEHAVIOR IN GOVERNMENT

2. 5.2.2. POLICY MAKERS IN THE EUROPEAN ECONOMIC

UNION

3. 5.3. GOVERNMENT INFLUENCE ON THE ECONOMY

4. 5.4. POLICY INSTRUMENTS OF THE U.S. TREASURY

1. 5.4.1. MANAGING THE TREASURY'S CASH BALANCES

1. 5.4.1.1. Treasury Tax and Loan Accounts

2. 5.4.1.2. Treasury Receipts and Outlays

2. 5.4.2. POWERS RELATING TO THE FEDERAL BUDGET AND

TO SURPLUSES OR DEFICITS

1. 5.4.2.1. General Economic Effects of Fiscal Policy

2. 5.4.2.2. Effects of Tax Policy

3. 5.4.2.3. Effects of Deficit Financing

 3. 5.4.3. RECENT FINANCIAL CRISIS-RELATED ACTIVITIES

5. 5.5. DEBT MANAGEMENT

6. 5.6. CHANGING THE MONEY SUPPLY

1. 5.6.1. CHECKABLE DEPOSIT EXPANSION

2. 5.6.2. OFFSETTING OR LIMITING FACTORS

3. 5.6.3. CONTRACTION OF DEPOSITS

7. 5.7. FACTORS AFFECTING BANK RESERVES

1. 5.7.1. CHANGES IN THE DEMAND FOR CURRENCY

2. 5.7.2. FEDERAL RESERVE SYSTEM TRANSACTIONS

1. 5.7.2.1. Open-Market Operations

2. 5.7.2.2. Depository Institution Transactions

3. 5.7.2.3. Federal Reserve Float

4. 5.7.2.4. Treasury Transactions

8. 5.8. THE MONETARY BASE AND THE MONEY MULTIPLIER

9. 5.9. SUMMARY

10.5.10. KEY TERMS

11.5.11. DISCUSSION QUESTIONS

12.5.12. EXERCISES

13.5.13. PROBLEMS
6. 6. International Finance and Trade

1. 6.1. GLOBAL OR INTERNATIONAL MONETARY SYSTEM

1. 6.1.1. DEVELOPMENT OF INTERNATIONAL FINANCE

2. 6.1.2. HOW THE INTERNATIONAL MONETARY SYSTEM

EVOLVED

1. 6.1.2.1. Before World War I

2. 6.1.2.2. World War I through World War II: 1915–

1944

3. 6.1.2.3. Bretton Woods Fixed Exchange Rate

System: 1945–1972

4. 6.1.2.4. Flexible Exchange Rate System: 1973–

Present

2. 6.2. EUROPEAN UNIFICATION

1. 6.2.1. EUROPEAN UNION

2. 6.2.2. EUROPEAN MONETARY UNION

3. 6.2.3. THE EURO

3. 6.3. CURRENCY EXCHANGE MARKETS AND RATES

1. 6.3.1. CURRENCY EXCHANGE MARKETS

2. 6.3.2. EXCHANGE RATE QUOTATIONS

 3. 6.3.3. FACTORS THAT AFFECT CURRENCY EXCHANGE
RATES

1. 6.3.3.1. Supply and Demand Relationships

2. 6.3.3.2. Inflation, Interest Rates, and Other

Factors

4. 6.3.4. CURRENCY EXCHANGE RATE APPRECIATION AND

DEPRECIATION

5. 6.3.5. ARBITRAGE

6. 6.3.6. EXCHANGE RATE DEVELOPMENTS FOR THE U.S.

DOLLAR

4. 6.4. CONDUCTING BUSINESS INTERNATIONALLY

1. 6.4.1. MANAGING FOREIGN EXCHANGE RISK

2. 6.4.2. ETHICAL CONSIDERATIONS

5. 6.5. FINANCING INTERNATIONAL TRADE

1. 6.5.1. FINANCING BY THE EXPORTER

1. 6.5.1.1. Sight and Time Drafts

2. 6.5.1.2. Bank Assistance in the Collection of Drafts

3. 6.5.1.3. Financing Through the Exporter's Bank

2. 6.5.2. FINANCING BY THE IMPORTER

1. 6.5.2.1. Financing Through the Importer's Bank

 2. 6.5.2.2. Importer Bank Financing—An Example

3. 6.5.3. BANKERS' ACCEPTANCES

4. 6.5.4. OTHER AIDS TO INTERNATIONAL TRADE

1. 6.5.4.1. The Export-Import Bank

2. 6.5.4.2. Traveler's Letter of Credit

3. 6.5.4.3. Traveler's Checks

6. 6.6. BALANCE IN INTERNATIONAL TRANSACTIONS GOAL

1. 6.6.1. NATURE OF THE PROBLEM

2. 6.6.2. BALANCE-OF-PAYMENTS ACCOUNTS

7. 6.7. SUMMARY

8. 6.8. KEY TERMS

9. 6.9. DISCUSSION QUESTIONS

10.6.10. EXERCISES

11.6.11. PROBLEMS

5. 2. INVESTMENTS

1. 7. Savings and Investment Process

1. 7.1. GROSS DOMESTIC PRODUCT AND CAPITAL FORMATION

1. 7.1.1. GDP COMPONENTS

 2. 7.1.2. IMPLICATIONS OF INTERNATIONAL PAYMENT
IMBALANCES

3. 7.1.3. LINK BETWEEN SAVING AND INVESTMENT

2. 7.2. FEDERAL GOVERNMENT RECEIPTS AND EXPENDITURES

1. 7.2.1. THE BUDGET

2. 7.2.2. FISCAL POLICY MAKERS

3. 7.2.3. DEBT FINANCING

3. 7.3. HISTORICAL ROLE AND CREATION OF SAVINGS

1. 7.3.1. FOREIGN SOURCES OF SAVINGS

2. 7.3.2. DOMESTIC SUPPLY OF SAVINGS

3. 7.3.3. CREATION OF SAVINGS

4. 7.4. MAJOR SOURCES OF SAVINGS

1. 7.4.1. PERSONAL SAVINGS

2. 7.4.2. CORPORATE SAVINGS

5. 7.5. FACTORS AFFECTING SAVINGS

1. 7.5.1. LEVELS OF INCOME

2. 7.5.2. ECONOMIC EXPECTATIONS

3. 7.5.3. ECONOMIC CYCLES

4. 7.5.4. LIFE STAGES OF THE INDIVIDUAL SAVER

 5. 7.5.5. LIFE STAGES OF THE CORPORATION

6. 7.6. CAPITAL MARKET SECURITIES

7. 7.7. A FURTHER LOOK AT THE 2007-09 FINANCIAL CRISIS

1. 7.7.1. EARLY FACTORS

2. 7.7.2. A BORROWING-RELATED CULTURAL SHIFT

8. 7.8. SUMMARY

9. 7.9. KEY TERMS

10.7.10. DISCUSSION QUESTIONS

11.7.11. EXERCISES

12.7.12. PROBLEMS

2. 8. Interest Rates

1. 8.1. SUPPLY AND DEMAND FOR LOANABLE FUNDS

1. 8.1.1. HISTORICAL CHANGES IN U.S. INTEREST RATE

LEVELS

2. 8.1.2. LOANABLE FUNDS THEORY

1. 8.1.2.1. Sources of Loanable Funds

2. 8.1.2.2. Factors Affecting the Supply of Loanable

Funds

3. 8.1.2.3. Effect of Interest Rates on the Demand for

Loanable Funds
 4. 8.1.2.4. Roles of the Banking System and of the
Government

5. 8.1.2.5. International Factors Affecting Interest

Rates

2. 8.2. DETERMINANTS OF MARKET INTEREST RATES

3. 8.3. RISK-FREE SECURITIES: U.S. TREASURY DEBT OBLIGATIONS

1. 8.3.1. MARKETABLE OBLIGATIONS

1. 8.3.1.1. Treasury Bills

2. 8.3.1.2. Treasury Notes

3. 8.3.1.3. Treasury Bonds

2. 8.3.2. DEALER SYSTEM

3. 8.3.3. TAX STATUS OF FEDERAL OBLIGATIONS

4. 8.3.4. OWNERSHIP OF PUBLIC DEBT SECURITIES

5. 8.3.5. MATURITY DISTRIBUTION OF MARKETABLE DEBT

SECURITIES

4. 8.4. TERM OR MATURITY STRUCTURE OF INTEREST RATES

1. 8.4.1. RELATIONSHIP BETWEEN YIELD CURVES AND THE

ECONOMY

2. 8.4.2. TERM STRUCTURE THEORIES

5. 8.5. INFLATION PREMIUMS AND PRICE MOVEMENTS

 1. 8.5.1. HISTORICAL INTERNATIONAL PRICE MOVEMENTS

1. 8.5.1.1. Ancient Rome

2. 8.5.1.2. The Middle Ages Through Modern Times

2. 8.5.2. INFLATION IN THE UNITED STATES

1. 8.5.2.1. Revolutionary War

2. 8.5.2.2. War of 1812

3. 8.5.2.3. Civil War

4. 8.5.2.4. World War I

5. 8.5.2.5. World War II and the Postwar Period

6. 8.5.2.6. Recent Decades

3. 8.5.3. TYPES OF INFLATION

1. 8.5.3.1. Price Changes Initiated by a Change in

Costs

2. 8.5.3.2. Price Changes Initiated by a Change in the

Money Supply

3. 8.5.3.3. Speculation and Administrative Inflation

6. 8.6. DEFAULT RISK PREMIUMS

7. 8.7. SUMMARY

8. 8.8. KEY TERMS

9. 8.9. DISCUSSION QUESTIONS

 10.8.10. EXERCISES

11.8.11. PROBLEMS

3. 9. Time Value of Money

1. 9.1. BASIC CONCEPTS

2. 9.2. COMPOUNDING TO DETERMINE FUTURE VALUES

1. 9.2.1. INFLATION OR PURCHASING POWER

IMPLICATIONS

3. 9.3. DISCOUNTING TO DETERMINE PRESENT VALUES

4. 9.4. EQUATING PRESENT VALUES AND FUTURE VALUES

5. 9.5. FINDING INTEREST RATES AND TIME REQUIREMENTS

1. 9.5.1. SOLVING FOR INTEREST RATES

2. 9.5.2. SOLVING FOR TIME PERIODS

3. 9.5.3. RULE OF 72

6. 9.6. FUTURE VALUE OF AN ANNUITY

7. 9.7. PRESENT VALUE OF AN ANNUITY

8. 9.8. INTEREST RATES AND TIME REQUIREMENTS FOR

ANNUITIES

1. 9.8.1. SOLVING FOR INTEREST RATES

2. 9.8.2. SOLVING FOR TIME PERIODS

9. 9.9. DETERMINING PERIODIC ANNUITY PAYMENTS

 1. 9.9.1. EXAMPLES INVOLVING ANNUAL PAYMENTS

2. 9.9.2. REAL ESTATE MORTGAGE LOANS WITH MONTHLY

PAYMENTS

10.9.10. MORE FREQUENT COMPOUNDING OR DISCOUNTING

INTERVALS

11.9.11. COST OF CONSUMER CREDIT

1. 9.11.1. UNETHICAL LENDERS

2. 9.11.2. APR VERSUS EAR

12.9.12. SUMMARY

13.9.13. KEY TERMS

14.9.14. DISCUSSION QUESTIONS

15.9.15. EXERCISES

16.9.16. PROBLEMS

4. LE9. LEARNING EXTENSION 9: Annuity Due Problems

1. LE9.1. FUTURE VALUE OF AN ANNUITY DUE

2. LE9.2. PRESENT VALUE OF AN ANNUITY DUE

3. LE9.3. INTEREST RATES AND TIME REQUIREMENTS FOR

ANNUITY DUE PROBLEMS

4. LE9.4. QUESTIONS AND PROBLEMS

5. 10. Bonds and Stocks: Characteristics and Valuations

1. 10.1. LONG-TERM EXTERNAL FINANCING SOURCES FOR
BUSINESSES

2. 10.2. DEBT CAPITAL

1. 10.2.1. WHO BUYS BONDS?

2. 10.2.2. BOND COVENANTS

3. 10.2.3. BOND RATINGS

4. 10.2.4. BONDHOLDER SECURITY

5. 10.2.5. TIME TO MATURITY

6. 10.2.6. INCOME FROM BONDS

7. 10.2.7. GLOBAL BOND MARKET

8. 10.2.8. READING BOND QUOTES

3. 10.3. CORPORATE EQUITY CAPITAL

1. 10.3.1. COMMON STOCK

2. 10.3.2. PREFERRED STOCK

3. 10.3.3. READING STOCK QUOTES

4. 10.4. DIVIDENDS AND STOCK REPURCHASES

1. 10.4.1. HOW DO FIRMS DECIDE ON THE DOLLAR

AMOUNT OF DIVIDENDS?

2. 10.4.2. STOCK DIVIDENDS AND STOCK SPLITS

3. 10.4.3. SHARE REPURCHASES

5. 10.5. VALUATION PRINCIPLES

6. 10.6. VALUATION OF BONDS

1. 10.6.1. DETERMINING A BOND'S PRESENT VALUE

2. 10.6.2. CALCULATING THE YIELD TO MATURITY

3. 10.6.3. RISK IN BOND VALUATION

1. 10.6.3.1. Credit Risk

2. 10.6.3.2. Interest Rate Risk

3. 10.6.3.3. Reinvestment Rate Risk

4. 10.6.3.4. Risks of Nondomestic Bonds

7. 10.7. VALUATION OF STOCKS

1. 10.7.1. VALUING STOCKS WITH CONSTANT DIVIDENDS

2. 10.7.2. VALUING STOCKS WITH CONSTANT DIVIDEND

GROWTH RATES

3. 10.7.3. RISK IN STOCK VALUATION

8. 10.8. VALUATION AND THE FINANCIAL ENVIRONMENT

1. 10.8.1. GLOBAL ECONOMIC INFLUENCES

2. 10.8.2. DOMESTIC ECONOMIC INFLUENCES

3. 10.8.3. INDUSTRY AND COMPETITION

9. 10.9. SUMMARY
 10.10.10. KEY TERMS

11.10.11. DISCUSSION QUESTIONS

12.10.12. PROBLEMS

6. LE10. LEARNING EXTENSION 10: Annualizing Rates of Return

1. LE10.1. HOLDING PERIOD RETURNS

2. LE10.2. ANNUALIZED RATES OF RETURN

3. LE10.3. PROBLEMS

7. 11. Securities Markets

1. 11.1. ISSUING SECURITIES: PRIMARY SECURITIES MARKETS

1. 11.1.1. PRIMARY MARKET FUNCTIONS OF INVESTMENT

BANKERS

1. 11.1.1.1. Originating

2. 11.1.1.2. Underwriting

1. 11.1.1.2.1. Shelf Registration

2. 11.1.1.2.2. Sell Securities to a Private Party

3. 11.1.1.2.3. Rights Offerings

4. 11.1.1.2.4. Competitive Bidding

3. 11.1.1.3. Selling

2. 11.1.2. COST OF GOING PUBLIC

 1. 11.1.2.1. Innovations Among Investment Banking
Firms

3. 11.1.3. OTHER FUNCTIONS OF INVESTMENT BANKING

FIRMS

2. 11.2. INVESTMENT BANKING REGULATION

3. 11.3. TRADING SECURITIES—SECONDARY SECURITIES

MARKETS

1. 11.3.1. ORGANIZED SECURITY EXCHANGES

2. 11.3.2. STRUCTURE OF THE NEW YORK STOCK

EXCHANGE

1. 11.3.2.1. Listing Securities

3. 11.3.3. SECURITY TRANSACTIONS

1. 11.3.3.1.

1. 11.3.3.1.1. Market Order

2. 11.3.3.1.2. Limit Order

3. 11.3.3.1.3. Stop-Loss Order

4. 11.3.3.1.4. Short Sale

5. 11.3.3.1.5. Buying on Margin

6. 11.3.3.1.6. Record Keeping

2. 11.3.3.2. Over-the-Counter Market

 3. 11.3.3.3. Third and Fourth Security Markets

4. 11.4. WHAT MAKES A GOOD MARKET?

5. 11.5. A WORD ON COMMISSIONS

6. 11.6. SECURITY MARKET INDEXES

7. 11.7. FOREIGN SECURITIES

8. 11.8. INSIDE INFORMATION AND OTHER ETHICAL ISSUES

9. 11.9. CHANGES IN THE STRUCTURE OF THE STOCK MARKET

10.11.10. SUMMARY

11.11.11. KEY TERMS

12.11.12. DISCUSSION QUESTIONS

13.11.13. PROBLEMS

8. LE11. LEARNING EXTENSION 11: Introduction to Futures and Options

1. LE11.1. WHY DO DERIVATIVES EXIST?

2. LE11.2. FUTURES CONTRACTS

3. LE11.3. OPTIONS

4. LE11.4. OPTION PAYOFF DIAGRAMS

5. LE11.5. SUMMARY

6. LE11.6. KEY TERMS

7. LE11.7. DISCUSSION QUESTIONS

 8. LE11.8. PROBLEMS

9. 12. Financial Return and Risk Concepts

1. 12.1. HISTORICAL RETURN AND RISK FOR A SINGLE FINANCIAL

ASSET

1. 12.1.1. ARITHMETIC AVERAGE ANNUAL RATES OF

RETURN

2. 12.1.2. VARIANCE AS A MEASURE OF RISK

3. 12.1.3. STANDARD DEVIATION AS A MEASURE OF RISK

2. 12.2. WHERE DOES RISK COME FROM?

3. 12.3. EXPECTED MEASURES OF RETURN AND RISK

4. 12.4. HISTORICAL RETURNS AND RISK OF DIFFERENT ASSETS

5. 12.5. EFFICIENT CAPITAL MARKETS

6. 12.6. PORTFOLIO RETURNS AND RISK

1. 12.6.1. EXPECTED RETURN ON A PORTFOLIO

2. 12.6.2. VARIANCE AND STANDARD DEVIATION OF

RETURN ON A PORTFOLIO

3. 12.6.3. TO DIVERSIFY OR NOT TO DIVERSIFY?

4. 12.6.4. PORTFOLIO RISK AND THE NUMBER OF

INVESTMENTS IN THE PORTFOLIO

5. 12.6.5. SYSTEMATIC AND UNSYSTEMATIC RISK

 7. 12.7. CAPITAL ASSET PRICING MODEL

8. 12.8. ETHICS AND JOB OPPORTUNITIES IN INVESTMENTS

9. 12.9. SUMMARY

10.12.10. KEY TERMS

11.12.11. DISCUSSION QUESTIONS

12.12.12. PROBLEMS

10.LE12. LEARNING EXTENSION 12: Estimating Beta

1. LE12.1. SECURITY MARKET LINE

2. LE12.2. QUESTIONS AND PROBLEMS

6. 3. FINANCIAL MANAGEMENT

1. 13. Business Organization and Financial Data

1. 13.1. STARTING A BUSINESS

1. 13.1.1. STRATEGIC PLAN WITH A VISION OR MISSION

2. 13.1.2. BUSINESS AND FINANCIAL GOALS

2. 13.2. FORMS OF BUSINESS ORGANIZATION IN THE UNITED

STATES

1. 13.2.1. PROPRIETORSHIP

1. 13.2.1.1. Corporation

3. 13.3. THE ANNUAL REPORT

4. 13.4. ACCOUNTING PRINCIPLES

5. 13.5. INCOME STATEMENT

6. 13.6. THE BALANCE SHEET

1. 13.6.1. ASSETS

2. 13.6.2. LIABILITIES

3. 13.6.3. OWNERS' EQUITY

7. 13.7. STATEMENT OF CASH FLOWS

1. 13.7.1.

1. 13.7.1.1. Sources

2. 13.7.1.2. Uses

8. 13.8. FINANCIAL STATEMENTS OF DIFFERENT COMPANIES

9. 13.9. GOAL OF A FIRM

1. 13.9.1. MEASURING SHAREHOLDER WEALTH

2. 13.9.2. LINKING STRATEGY AND FINANCIAL PLANS

3. 13.9.3. CRITERION FOR NONPUBLIC FIRMS

4. 13.9.4. WHAT ABOUT ETHICS?

10.13.10. CORPORATE GOVERNANCE

1. 13.10.1. PRINCIPAL-AGENT PROBLEM

2. 13.10.2. REDUCING AGENCY PROBLEMS

 11.13.11. FINANCE IN THE ORGANIZATION CHART

12.13.12. SUMMARY

13.13.13. KEY TERMS

14.13.14. DISCUSSION QUESTIONS

15.13.15. PROBLEMS

2. LE13. LEARNING EXTENSION 13: Federal Income Taxation

1. LE13.1. DEPRECIATION BASICS

2. LE13.2. A FEW WORDS ON DEPRECIATION METHODS

3. LE13.3. QUESTIONS AND PROBLEMS

3. 14. Financial Analysis and Long-Term Financial Planning

1. 14.1. FINANCIAL STATEMENT ANALYSIS

2. 14.2. RATIO ANALYSIS OF BALANCE SHEET AND INCOME

STATEMENT

3. 14.3. TYPES OF FINANCIAL RATIOS

1. 14.3.1. LIQUIDITY RATIOS AND ANALYSIS

2. 14.3.2. ASSET MANAGEMENT RATIOS AND ANALYSIS

3. 14.3.3. FINANCIAL LEVERAGE RATIOS AND ANALYSIS

4. 14.3.4. PROFITABILITY RATIOS AND ANALYSIS

5. 14.3.5. MARKET VALUE RATIOS AND ANALYSIS

Another random document with
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"'Let him alone, let him alone!' said the abbot—that was
Abbot John, not the present Abbot Sylvester—'Let him
alone,' says the abbot. 'Let me deal with him.'"

"So he calls Brother Thomas, and after some talk, he makes

him his secretary, and custodian of all the books."

"'And, Brother Thomas,' says he, 'I would have you take
especial care of the Latin authors, and cause some new
copies to be made of Cicero his Offices, and of Virgil and
Horace, and spare no expense upon them.'"

"Well, that was the end of Brother Thomas's hankering after

heresy."

Jack could not help smiling at the story, though it was, in

some respects, a sad one.

"And now I have discharged my errand, and you must make

what use of it you will," said Father John; "only, if you love
me, let no word of the matter go abroad. I have given them
warning at the Hall, also—and, if I have done wrong, the
saints forgive me. Alack, my poor bones!"

"If your reverence will take some brief repose, we will have
supper ready directly," said Master Lucas; "here comes my
good housekeeper. Cicely, let our meal be prepared directly;
and, let every thing be of the best, since this good father is
to be of our company."

"Nay, I know not if I ought to remain here," said Father

John, who had been solacing himself all through his long
and, to him, arduous journey, with the thought of the
master baker's good cheer. "I ought, perhaps, to go to the
convent—"
"I am a villain, if you leave us this night," said Master Lucas
sturdily. "It were foul shame to me to let such a reverend
father, and my son's benefactor to boot, depart from my
roof fasting. Make haste, good Cicely, and do your best; and
you, son Jack, attend me with the lantern, that I may draw
some good wine for our honored guest."

"What is to be done now, son?" asked Master Lucas, so

soon as they were alone in the cellar.

"Indeed, father, I cannot say," returned Jack. "I see not but
I must abide the storm."

"By our Lady, that shall you not!" said his father. "This good
old man has given us warning, and it were a mere tempting
of Providence, not to profit thereby. When will Davy Brent
be sailing again?"

"Not under two weeks, he told me yesterday. But, father,

how can I leave you?"

"Better lose you for a little time, than altogether," said

Master Lucas sadly. "Son, son! It was an evil day when I
sent you from me."

"Nay, my dear father, say not so," replied Jack earnestly.

"Truly, this cross is a heavy one, and hard for flesh to bear;
yet I cannot regret that I have taken it up. The truth as I
have learned it, first from Uncle Thomas, and afterward
from the Scripture itself, is worth more to me than all the
world hath to offer. I only pray that I may have grace to
hold it to the end."

"Well, well! It skills not, arguing that matter now," said his
father rather impatiently. "The question now is, how are we
to use the good man's warning. You might go to Harrowdale
where Madam Barbara is. I am sure the squire would give
you welcome—or you might go out to Holford."

"I doubt that would be stepping from the frying-pan into the
fire, as matters are at present," said Jack; "and yet I would
fain see my uncle."

"Well, well, we will talk farther, presently, when the folks are
abed," returned his father; "we must not remain longer
here, or Anne will suspect something. I would she were
away."

"Father," said Jack earnestly, "I beg of you, and it were the
last favor I should ever ask of you, as it well may be—I pray
you, be kind and patient with Anne. She is very unhappy,
and at times, I think, she is hardly herself."

"If she be honest and true, I will be a kind father to her, as

I have ever been, I think," said the baker; "but if she prove
a traitor, and do aught to betray her brother—"

"She may not be able to help it," said Jack. "Do you not
see, dear father, that she must answer any questions the
priest chooses to ask her? With that engine of confession in
their hands, the churchmen hold the inmost keys of every
man's house and family."

"A plague take the whole of them!" exclaimed Master Lucas.

"A plague is like to take them, and that before long, if all we
hear about the breaking up of the religious houses be true,"
said Jack. "It is because they know how it will take the
power out of their hands, that the priests so oppose the
spread of the true gospel. But I pray you, father, be kind to
Anne, for my sake."
"Are you and Jack going to stay in the cellar all night and
catch your deaths with the damp?" called Cicely from the
top of the stairs. "Here is supper all but ready, and you
would but draw the wine and ale, and I am sure you must
need your food, as well as the good father yonder. Marry, I
was fain to give him a dish of cakes to stay his appetite till
supper was ready."

At supper, Father John was the merriest of the party. Like

many easy-going people he had the gift of putting far-off
the evil day, and persuading himself that what he wished
not to happen, never would happen. He had made what was
for one of his habits a great sacrifice of ease and comfort to
warn his young friend, and he was inclined to take the
reward of his good deed. He praised Cicely's cooking, paid
Anne various old-fashioned compliments, and made her
very angry by telling her she was a foolish girl to wear out
her youth in a nunnery. She had far better marry some
stout young fellow and bring up a dozen of sturdy lads and
maids to comfort her in her old age.

"I would you could persuade her to do so," said the baker.

"I have already told you, father, that I look upon myself as
the vowed bride of the Church," said Anne with more
asperity of tone and manner than altogether suited the
character she avowed. "If I am to hear more such
discourse, I shall retire from the table."

"Hoity-toity!" said Father John; "Since when hath it been

the fashion for maidens to threaten their fathers either
natural or ghostly in such wise? But, come, I meant no
offence. I did but say what I truly think. I am an old man,
my daughter, and, though I am a priest, I have seen much
more of life than you have, both in the cloister and out of it;
and I tell you, in all seriousness, that a woman who brings
up her children in honor and in the fear of God, does a more
acceptable work in His eyes—ay, and bears more pains and
penances, too—than any cloistered nun since the days of
St. Bridget herself. Think you the vigil is not as acceptable
which is passed in soothing and tending a sickly, suffering
babe, as that which is spent in kneeling on a chapel floor?"

"I should say so," said Cicely, much edified. "And yet
nobody thinks of there being any merit in a wife's or
mother's care of her family, because it just comes along in
the course of life."

"That is to say, it comes in the course of God's providence,"

said Jack. "The one state of life is God's appointment, and
the other is man's invention."

"I say not so much as that," said Father John hastily.

"Doubtless the cloister is His appointment for some, as the
family is for others. But come, Mistress Anne, since that is
your name, be not displeased with me, who am a man old
enough to be your father, and a priest beside, but pledge
me in a cup of this sweet wine which is just fit for a
maiden's drinking."

"I thank you, but I drink no wine," said Anne coldly.

"Anne, you are scarce civil," said her father. "I pray your
reverence to pardon her ill manners."

"Oh, let her have her way," said the old priest. "Caprice is
the privilege of women, poor things, and it were hard to
deprive them of it. Young maids love to say No. Eh,
daughter?" he added, with his jolly laugh. "We all know
what that means. The 'I will not' of a bishop-elect and that
of a maiden come to much the same thing in the end."
Good reason as they had for gravity, neither Jack nor his
father could forbear laughing at Anne's discomfiture.

"Come, come, never mind it, child, and do not spoil the
evening by peevishness," said her father. "Who knows how
many more happy evenings we may spend together? Father
John, will your reverence take another cup of wine?"

"No more, no more," replied the old man. "I am no toss-

pot, my good Master Lucas, though I love a social cup now
and then. I would fain go to rest, since you are so kind as to
afford me a bed, for I am weary after my ride."

"When did you and Anne go to church?" asked Jack as he

returned, after lighting the father to bed, to help Cicely put
away the wine.

"Anne was not at church with me," replied Cicely, surprised.

"I left her at her prayers, in the little cabinet yonder, while I
went to carry some broth to Dame Higby."

Jack started.

Then Anne had, after all, heard the whole. What use would
she make of her knowledge? He could not guess. He went
at once to his father's room, and told him what he had
heard from Cicely. Their conference lasted long, but with no
very satisfactory result, and at last it was decided to wait till
morning, and consult Sir William.

"The morrow is the feast of St. Michael's," said the baker.

"They are not likely to do anything on that day, and we shall
have time to think a little. But, Jack, if you have any of
these books, I pray you hide or destroy them this very
night."
"I will do so," said Jack. "Give me your blessing and your
forgiveness, dearest father, before I leave you."

"Forgiveness is none when there has been no fault," said

Master Lucas. "From thy cradle to this time, thou hast ever
been to me a dutiful and good son. My blessing thou hast
and wilt ever have, let this matter end how it will."

CHAPTER XX.

THE BREAKING OF THE STORM.

Jack went to his room, where his lamp was already lighted,
and taking his beloved books from their usual hiding-place,
he began to think what he should do with them. They were
not many. There was first and dearest of all, the New
Testament with Tyndale's notes, which had been given him
by Master Fleming; then his Greek Testament; the Prophecy
of Isaiah which he had brought from Mary Brent's house,
and two or three small tracts and treatises. These last he
read carefully through, once more, and then burned; but he
could not bring his mind to burn his Bible.

There was a certain little cupboard in the wall, concealed by

a sliding panel, which Jack had discovered by accident some
few years before, and of the existence of which he had
never heard any one speak. He had concealed his discovery
with a boy's fancy for mystery, and now it was to serve a
good purpose. He opened it and placed his books therein,
all but his Greek Testament, which he thought he might
safely reserve. He then closed the panel, and pushed his
desk against it, and he had just finished these
arrangements when he heard some one open his door.

He looked hastily and angrily round.

There stood Anne with a lamp in her hand.

"What now?" said he, trying to speak indifferently. "What

brings you here so late?"

"I might ask what keeps you up so late," returned Anne.

"You seem to have little regard to the repose of your guest,
that you make such a noise."

"No fear of disturbing him, honest man," said Jack. "He is

snoring like a porpoise, this minute, and I dare say he
sleeps all the better for his unwonted exercise. He is a kind,
good-natured man, though he may have his little infirmities,
like the rest of us."

"It skills not talking of him," said Anne, entering the room,
and closing the door. "Jack, what have you been doing, this
night?"

"I have been burning some papers, if it imports you to

know," replied Jack, not altogether pleased with the tone
Anne assumed.

"Jack, have you destroyed your vile, heretical books?"

"I have no vile, heretical books, Sister Anne; therefore I

have no opportunity to destroy them. Let me ask you in
turn, since questions are the fashion, what has brought you
to my room at this time of night?"
"It is, indeed, a time of night for all honest folks to be abed,
unless they watch, as a duty," said Anne; "but if I had been
inclined to sleep, I could not do so. What were you and my
father talking about, so long?"

"You had better ask my father, if you desire to know,"

replied Jack. "If he sees fit to tell you his business, I can
have no objection, but I do not think he would thank me for
repeating it."

Anne stood silent, a moment. Then she said, "Jack, where

has Sister Barbara gone?"

"She has gone to her friends, as she told you."

"That is not answering my question. I ask you to whither

she has gone."

"And I reply, Sister Anne, that even if I knew, I would not

tell you."

"You mean to say that I am not to be trusted."

"Even so."

"Jack," said Anne, setting down the lamp, and coming

nearer to her brother, "do you know that Father Barnaby is
returned, and is, even now, in Bridgewater?"

"I knew he had returned, but not that he was here," replied
Jack. "How do you know that he is here? Have you already
seen him?"

"No; that is—Jack, do you mean still to persist in your

heresy? Do you mean to draw down disgrace and ruin on
your father's house, to break his heart and mine, all that
you may follow your own wicked and headstrong fancies?
Are you so much wiser than all the world? What chance
have you had to learn so much more than I, that you are so
confident in your own opinion?"

"To your first question," replied Jack, "I answer that I do

mean, God helping me, to hold fast even to the death, to
His truth which you call heresy. I do not pretend to be wiser
than all the world, but if I see all the world wrong, that does
not excuse me for being wrong also. I am not following my
own will or conceit, but the Word of God, and I must go
whither it leads me, though it be to prison and death as it
led Agnes Harland, and has led many another."

"And when you are brought—I mean, if you are brought

before Father Barnaby, you will say these same things. Oh,
brother, brother!" she exclaimed, falling on her knees at
Jack's side. "Do not be obstinate! Do not throw away your
life for nothing. You are young; you have been misled by
others. They will be merciful to you if you do but recant
your errors, and tell the names of those who have misled
you. Oh, brother, brother! Do not be stiff-necked; do but
confess, and all will be well."

A sudden light broke in upon Jack's mind. He cast off his

sister's hand and drew back, as if from a snake.

"Anne!" said he sternly. "You have betrayed me."

Anne did not answer. She covered her face with her hands.

"You have acted the traitor's part a second time," continued

Jack. "It was not enough to give over your friend to death,
but you have stained your soul with this new treason. I
believe you have already seen Father Barnaby."

Anne did not deny it. She sunk her head still lower, but said
not a word.
"You have, then, done the mischief already," said Jack.
"When did you see the priest?"

"It does not become you to question me or to speak to me

thus," said Anne, striving to assume her usual tone. "I have
but done that which was right, and my duty. No man is
bound to keep faith with heretics. You speak of acting
according to your conscience. Why should I not act
according to mine?"

"You know that you have not done so," said Jack, fixing a
penetrating look on his sister's face. "You have belied your
own conscience, and betrayed me to death, for the sake of
what, in your heart, you know to be a lie. Yes, Anne, in your
heart, you believe that what I have told you, and what you
heard from Agnes, is true—God's own truth. If this may be
heresy, you are at heart as much a heretic as I am."

"I will not hear this!" said Anne hastily. "No one shall call
me a heretic. You have no right to complain. I gave you fair
warning. I come to you, to-night, not because I repent of
what I have done, but to warn you—to give you a last
chance."

"Many thanks to you!" said Jack, with a bitterness he could

not altogether restrain. "Pray, what is to be the price of this
piece of villainy? Are you to be made a prioress, or are you
to found a new order? But I not speak so," he added hastily.
"God give me grace to forgive you."

He walked up and down the room two or three, times, and

then threw himself on his knees, by the bedside.

Anne stood, stiff and silent.

At last, Jack rose and turned to her.

"Anne," said he, "you have done a base and cowardly deed,
and you will one day see it so, however you may regard it
at present. I know not what has prompted you, and I desire
not to judge you. Only remember this, when your day of
remorse and repentance comes—as come it will—remember,
there was forgiveness even for them who crucified our dear
Lord, and the same forgiveness will be granted to you if you
truly repent, and accept the offer of mercy. For my own
part, I freely pardon you, and if I do not do so wholly, now,
I believe the grace will be given me. But I warn you, that
you are placing yourself in imminent danger of eternal
perdition, by your present resisting of the Spirit and of your
own conscience. 'He who denieth me before men, him will I
deny before the angels of God,' says our Lord Himself. He
now holds out His pitiful arms even to you, but there may
come a day when He will hold them out no more—when you
may long to confess what you now deny, and it may be
forever too late."

Anne still stood silent, but her face showed the storm
within.

"But I must not throw away my life," said Jack hastily. "It
may be that I can yet escape."

"There is no chance. The house has been watched ever

since your return," said Anne, in a hoarse voice. "You will
but make matters worse."

"Be it so, then. I will bide the storm which you have brought
upon me," said Jack. "I pray you to leave me, sister. I have
need of time and solitude to collect my thoughts and
prepare for that which is coming."

Without a word Anne turned and left the room, and Jack
fastened the door.
Then, drawing his Bible from its hiding-place and trimming
his lamp, he knelt down and read, again and again, the
tenth chapter of St. Matthew's Gospel. ¹ He passed several
hours in reading and prayer, and then, as the gray morning
began to creep in, he rose and dressed himself as for a
festival, and when it was fully day, he went down to his
father's room, to help him dress, as usual. He was met at
the door by Simon, with a face full of terror and dismay.

¹ I request every reader of these pages to do the same.

"Oh, Master Jack, Master Jack! What can have happened?

The constable with his men are at the door and demand
entrance, and Father—I cannot think of his name—"

"Father Barnaby," said Jack gently. "Go down, Simon, and

say I will be with them directly. I will but see my father."

"What means all this disturbance?" asked Master Lucas,

opening his door. "Who are those men without?"

"Let me come in, dear father, and I will tell you all," said
Jack. "Go down, Simon. Dear Cicely, do but be quiet, and
dress yourself."

Jack entered his father's room, and, shutting the door, told
him what had happened.

"Then it is too late!" exclaimed Master Lucas, wringing his

hands in anguish. "My son, my dear son! Fool that I was!
Why did I not insist on your leaving me last night?"

"It would have been useless," said Jack. "I have reason to
know that we were watched from the moment of our return.
But let us go down and face these men quietly and
manfully."

They descended accordingly, and found the shop filled with

men. Father Barnaby occupied the sitting-room, and was
attended by Brother Joseph, the sacristan from Holford,
who favored Jack, on his entrance, with a glance of
triumphant malignity, from beneath his down-dropped
eyelids. Father John occupied the easy-chair, sitting upright
and grave, and as Jack and his father entered the room, he
arose, and with a tone of marked kindness, bestowed his
blessing upon them.

"I thank you heartily," said the baker; and then, turning to
Father Barnaby, he said, "Your reverence is an early visitor.
May I ask what has brought you to my poor house at this
hour?"

"My business is far from pleasant, Master Lucas," returned

the priest austerely. "It is simply to search your house for
heretical books, and to arrest this youth, your son, that he
may be examined concerning certain errors which he has
received and also endeavored to spread abroad among the
faithful children of the Church. I must ask you to call all
your family together."

"Jack, call your sister and cousin," said the baker briefly.

"With your leave, the young man abides here," said Father
Barnaby.

"As you please," returned Master Lucas; "here comes one,

to speak for herself. This is my cousin, Cicely Annan, a
widow, who hath kept my house since I lost my wife. My
daughter is, I suppose, in her room. Peter, call your young
mistress."
Anne presently made her appearance. She was very pale,
and evidently greatly agitated.

"This is the whole of my family," said Master Lucas. "This

reverend gentleman is from Holford, and did us the honor to
sup and sleep with us."

"I know Father John of Holford, well," said Father Barnaby

dryly. "Methinks he might be better found in his own parish,
on this holy day."

"Good brother—or son, as I may well call you, since I am

old enough to be your father—I have yet to learn on what
ground I am to ask your leave as to when and how I shall
leave my parish," said Father John, with more dignity than
Jack had thought he could assume. "If your commission
extends to my private affairs, I would fain see your
warrant."

Father Barnaby looked somewhat disconcerted, for a

moment. "I crave your pardon, good brother," he said,
recovering himself. "Doubtless it was business of moment
which brought you to this house. But, Master Lucas, have
you not a lady abiding with you—a lady formerly a nun in
the convent where your daughter was bred?"

"She has been with us, but she left us yesterday, to go to

friends in the country," replied Master Lucas.

"Where did she go?" was the next question.

"I know not," replied Master Lucas. "It is somewhere among

the hills, but I know not the name of the place nor of the
family whither she has gone."

This was true, for both Master Lucas and Jack had carefully
abstained from informing themselves on these points.
"Umph! Well, that matters not now," said Father Barnaby.
"Master Lucas, I regret to say that I have certain
information that this your son (who is a youth of parts and
understanding beyond his years) entertains the most
heretical and false opinions concerning the sacraments, the
adoration of saints, and other matters of the last
importance. Do you know aught of this matter?"

"Your reverence can hardly expect me to bear witness

against my own son—at least till I am obliged to do so,"
replied Master Lucas. "He hath ever been a good and dutiful
son—that I can say for him."

"Have you any heretical books in your possession?" asked

the priest, turning to Jack.

"I have a copy of the New Testament in Greek," replied

Jack, "if you call that heretical; also, I have two treatises
which your reverence gave me, one concerning the eleventh
ode of Horace, and the other on the Metamorphoses of
Ovid. Your reverence knows best what they are. Also I have
Virgil and Horace, and certain other Latin books."

"Play not with me, young sir," said the priest, frowning. "I
have certain intelligence from one who has seen it, that you
have in your possession a copy of the Lutheran New
Testament. I require you to put it into my hands."

Jack was silent, and did not move.

"Come, my son," said Father Barnaby, assuming a more

friendly tone, "I pray you, be not obstinate. Do but give me
up your books, and promise me to confess openly your
errors, and all may yet be well. Unless you will do so I must
search your father's house, and commit you to prison,
where it may go hard with you."
"I am a prisoner in your hands, and you must needs do
your pleasure," said Jack briefly. "I have nothing more to
say, except that, whatever I may be, my father knows
naught of these matters."

Jack and the rest of the family were in the sitting-room,

while the house was thoroughly searched, but in vain. The
hiding-place the books remained undiscovered, to the great
chagrin of Brother Joseph, who showed himself an adept in
the business, and who had to report his ill success to his
principal.

"It matters not, we can take another way. Daughter," said

Father Barnaby, turning to. Anne, who had hitherto stood
quite silent, "you, at least, are a faithful child of the Church,
as you have already shown. Can you tell me where these
books are likely to be hidden?"

"I believe them to be in a small cupboard in the wall, behind

my brother's desk," answered Anne, in a husky tone.

"Vile wretch that thou art, wouldst thou betray thy

brother?" exclaimed her father, thrown off his guard.

"Your daughter, Master Lucas, does but do her duty in

discovering her brother's guilt," said Father Barnaby. "It is
the greatest kindness she could show him. Rejoice that you
have one faithful child left."

"She is no child of mine from this day," said Master Lucas.

"I wholly disown and cast her off. I would she had died at
her birth, rather than she should have lived to be what she
is."

"Father, remember your promise," said Jack; "I pray you do

nothing hastily."
Brother Joseph now returned with the books. "Is this all you
have?" asked the priest, examining them.

"That is all."

"You and your uncle had other books when you were at
Holford, I know," said the priest. "What were they, and
whence did you obtain them?"

Jack was silent.

"You will do the old man no service by this silence, if that be

your thought," said Father Barnaby. "You had best be frank
with me, since I mean you naught but good."

"No doubt," answered Jack dryly. "I thank your reverence

for your good intentions."

"There is enough of this," said Father Barnaby angrily.

"Since you are obstinate, matters must take their course.
Constable, lead this youth to jail, and lodge him like the
others. Master Lucas, I advise you to remain quiet and be
amenable, and no harm shall befall you."

"Farewell, dear father," said Jack. "I pray you heartily to be

of good comfort and put your trust in God. Have no fears
for me, I am in His hands who did never fail them that trust
in Him, and no real harm can befall me. Farewell, dear
Cicely, you have been like a mother to me. Father John, I
thank you heartily for all your kindness and good counsel."

"Have you no word for your sister, dear son?" asked Father
Barnaby.

"I have already said my farewell to my sister," replied Jack

gravely and sadly. "I have no more to add, save to beg her
for her soul's salvation to remember my parting words. I
am ready to go, Master Constable."

"My blessing go with thee, my son!" said his father. "I trust
we may yet see you here again."

"And mine, also," added Father John, rising "and if my

interest in your behalf is of any you shall have it with all my
heart, as well as my prayers to our Lord and all the saints
for your good deliverance."

Master Lucas stood gazing after his son till he could be seen
no longer. Then, turning away, his eye fell on Anne, who
remained standing.

"Do you stand there in my presence, after what you have

done?" he asked, in sternly measured tones, as if he would
not express the wrath which stirred him at sight of his
daughter. "Think you the sight of you can be grateful to my
eyes? I would you had died at your birth ere I had lived to
see this day!"

"Nay, my good, my kind friend," said Father John. "Be not

over hasty. I trust that this maiden had nothing to do with
her brother's misfortune. Is it not so, daughter?"

"I did what was right," said Anne, striving to speak calmly.
"My brother is an heretic, and a blasphemer of Holy Church
and the sacraments, and not only so, but he was ever
striving to prevent me. I delivered him to justice for the
sake of his soul and mine own."

"I verily wonder whether thou art my own daughter," said

the master baker slowly, "or whether my child died in the
convent yonder, and some devil entered into her body!
Surely, thy mother and I never had such a monster! I will
not curse thee, for the sake of him who has gone; but get
thee from my sight, or I cannot answer for what I may do!
Get to thy chamber—dost hear me?" he repeated, stamping
his foot.

"Yes, go, daughter," said the old priest. "You do but enrage
your father the more by your carriage, which I must say is
neither maidenly nor Christian. Get you to your chamber,
and repent if you can, for, in sooth, you have been guilty of
a great sin. My poor, dear friend!" he added, as Anne
withdrew. "Let us forbear harsh words. They can do no
good. Let us kneel down and pray, not only for our dear
young brother, but for this misguided girl. I do trust all may
yet be well. The bishop is a kind-hearted man, and averse
to all harsh measures, and I have some interest with him
which I shall not spare to use. I hope all may yet be well."

CHAPTER XXI.

ANNE.

Anne retired to her room and locked herself in, a precaution

which she might have spared, for nobody came near her
except one of the maids to bring her some food. The girl,
though she did not speak, looked at Anne with an
expression of wonder and reproach, which went to her
heart.