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File: Ch.06, Chapter 6: The Risks and Returns from Investing

Multiple Choice Questions

1. Total return is equal to:

a. capital gain + price change.

b. yield + income.
c. capital gain - loss.
d. yield + price change.

Ans: d
Difficulty: Easy
Ref: Return

2. Which of the following is not part of the yield component of total return?

a. Dividend payment on common stock

b. Coupon interest payment on bonds
c. Capital gain upon sale of stock
d. Dividend payment on preferred stock

Ans: c
Difficulty: Easy
Ref: Return

3. Investors should be willing to invest in riskier investments only:

a. if the expected holding period is short term.

b. if there are no safe alternatives except for holding cash.
c. if the expected return is adequate for the risk level.
d. if they are speculators.

Ans: c
Difficulty: Easy
Ref: Risk

4. If interest rates are expected to rise, you would expect:

a. bond prices to fall more than stock prices.

b. bond prices to rise more than stock prices.
c. stock prices to fall more than bond prices.
d. stock prices to rise and bond prices to fall.

Ans: a
Difficulty: Moderate
Ref: Risk

Chapter Six 70
The Risks and Returns from Investing
5. An impending recession is an example of:

a. interest rate risk.

b. inflation risk.
c. market risk.
d. financial risk.

Ans: c
Difficulty: Moderate
Ref: Risk

6. Financial risk is most closely associated with:

a. the use of equity financing by corporations.

b. the use of debt financing by corporations.
c. equity investments held by corporations.
d. debt investments held by corporations.

Ans: b
Difficulty: Moderate
Ref: Risk

7. Political stability is the major factor concerning:

a. exchange-rate risk.
b. systematic risk.
c. nonsystematic risk.
d. country risk.

Ans: d
Difficulty: Moderate
Ref: Risk

8. Liquidity risk:

a. is the risk that investment bankers normally face.

b. is lower for small OTC stocks than for large NYSE stocks.
c. is a risk associated with secondary market transactions.
d. increases whenever interest rates increase.

Ans: c
Difficulty: Moderate
Ref: Risk

Chapter Six 71
The Risks and Returns from Investing
9. The housing bubble and resulting credit crisis of 2008 is an example of:

a. nonsystematic risk.
b. systematic risk.
c. inflation risk.
d. political risk

Ans: b
Difficulty: Easy
Ref: Risk

10. If a U.S. investor buys foreign stock, his dollar-denominated return will
increase if the dollar:

a. appreciates relative to the foreign currency.

b. depreciates relative to the foreign currency.
c. remains unchanged relative to the foreign currency.
d. moves to a net gain position relative to all foreign currencies.

Ans: b
Difficulty: Difficult
Ref: Risk

11. New financial disclosure regulations affecting the brokerage industry are
a type of:

a. market risk.
b. financial risk.
c. business risk.
d. liquidity risk.

Ans: c
Difficulty: Moderate
Ref: Risk

12. Which of the following corresponds most closely with an increase in interest
rates?

a. Business risk
b. Financial risk
c. Liquidity risk
d. Inflation risk

Ans: d
Difficulty: Moderate
Ref: Risk

Chapter Six 72
The Risks and Returns from Investing
13. Assume an investor purchases a bond when the Euro is quoted at $0.96 per Euro
and sells the bond when the Euro is quoted at $1.12 per Euro. Relative to the
dollar, the Euro has:

a. appreciated, and the investor has gained from the currency move.
b. appreciated, and the investor has lost from the currency move.
c. depreciated, and the investor has gained from the currency move.
d. depreciated, and the investor has lost from the currency move.

Ans: a
Difficulty: Difficult
Ref: Currency and Returns

14. To calculate the return on a stock that pays a year-end dividend, an investor
should:

a. divide the stock’s sale price by its purchase price and subtract 1.
b. add the dividend and sale price, divide by the purchase price and subtract 1.
c. divide the sale price by the purchase price and add the dividend yield.
d. divide all cash flows received by the selling price and subtract 1.

Ans: b
Difficulty: Moderate
Ref: Measuring Returns

15. Which of the following is true regarding the cumulative wealth index? It:

a. is measured by adding up the total returns over the holding period and dividing by
the investment.
b. uses a beginning index value (often set to $1, but it can be set to any amount).
c. is the present value of the future cash flows expected from the investment.
d. uses the arithmetic mean as the rate of growth of one’s wealth.

Ans: b
Difficulty: Difficult
Ref: Measuring Returns

16. Adding 1 to return produces the:

a. arithmetic mean.
b. return relative.
c. cumulative wealth index.
d. geometric mean.

Ans: b
Difficulty: Difficult
Ref: Measuring Returns

Chapter Six 73
The Risks and Returns from Investing
17. In deriving changes in wealth over time, the return relative solves the problem of:

a. inflation.
b negative returns.
c. interest rates.
d. tax differences.

Ans: b
Difficulty: Moderate
Ref: Measuring Returns

18. If the Dow Jones Industrials had a price appreciation of 6 percent one year and yet
total return for the year was 9 percent, the difference would be due to:

a. the tax treatment of capital gains.

b. the cumulative wealth effect.
c. dividends.
d. inflation.

Ans: c
Difficulty: Moderate
Ref: Measuring Returns

19. In order to determine the compound growth rate of an investment over

some period, an investor would calculate the:

a. arithmetic mean.
b. geometric mean.
c. calculus mean.
d. arithmetic median.

Ans: b
Difficulty: Moderate
Ref: Summary Statistics for Returns

20. A major difference between real and nominal returns is that:

a. real returns adjust for inflation, and nominal returns do not.

b. real returns use actual cash flows, and nominal returns use expected cash flows.
c. real returns adjust for commissions, and nominal returns do not.
d. real returns show after-tax returns, and nominal returns show before-tax returns.

Ans: a
Difficulty: Moderate
Ref: Summary Statistics for Returns

Chapter Six 74
The Risks and Returns from Investing
21. When most people refer to mean rate of return, they are referring to the:

a. holding period rate of return.

b. arithmetic average rate of return.
c. geometric average rate of return.
d. cumulative average rate of return.

Ans: b
Difficulty: Easy
Ref: Summary Statistics for Returns

22. Which of the following statements regarding the arithmetic mean and the
geometric mean is true?

a. The arithmetic mean is always a better measure of average performance.

b. The geometric mean is always a better measure of average performance.
c. The arithmetic mean is a better measure of performance over single periods.
d. The geometric mean is the best estimate of the expected return for the next period.

Ans: c
Difficulty: Difficult
Ref: Summary Statistics for Returns

23. The equity risk premium is the difference between the expected return:

a. on stocks and bonds.

b. on high-grade stocks and low-grade stocks.
c. on stocks and the risk-free rate.
d. on a stock market index and the inflation rate.

Ans: c
Difficulty: Moderate
Ref: Measuring Risk

24. Which of the following statements about the expected equity risk premium is
true?

a. It is occasionally negative.
b. There is no direct way to measure it.
c. It decreases as investor uncertainty increases.
d. It increases as the risk-free rate increases.

Ans: b
Difficulty: Difficult
Ref: Measuring Risk

Chapter Six 75
The Risks and Returns from Investing
25. The standard deviation of a security measures the:

a. systematic risk of the security.

b. unsystematic risk of the security.
c. total risk of the security.
d. risk per unit of return for the security.

Ans: c
Difficulty: Moderate
Ref: Measuring Risk

26. Present value is based on the concept of:

a. compounding.
b. systematic risk.
c. duration.
d. discounting.

Ans: d
Difficulty: Easy
Ref: Compounding and Discounting

27. Over the past 50 years, which of the following financial assets showed the
greatest amount of price volatility, as measured by standard deviation?

a. Small-cap stocks
b. Large-cap stocks
c. Treasury bonds
d. Treasury bills

Ans: a
Difficulty: Moderate
Ref: Realized Returns and Risks from Investing

28. A number of prominent observers expect the equity risk premium in the future to
be:

a. considerably lower than that of the past.

b. considerably higher than that of the past.
c. very similar to the historical average.
d. very similar to the recent value.

Ans: a
Difficulty: Difficult
Ref: Realized Returns and Risks from Investing

Chapter Six 76
The Risks and Returns from Investing
29. If you invest in German bonds and the Euro becomes stronger during your
holding period, then:

a. you will be able to buy back fewer dollars when you redeem your bond.
b. your dollar-denominated return will increase.
c. your-dollar denominated return will decrease.
d. your return will be the interest you receive.

Ans: b
Difficulty: Difficult
Ref: Taking A Global Perspective

30. As the dollar falls,

a. foreign investors owning U.S. stocks suffer.

b. U.S. investors owning U.S. stocks suffer.
c. U.S. investors owning foreign stocks suffer.
d. foreign investors owning foreign stocks suffer.

Ans: a
Difficulty: Moderate
Ref: Taking A Global Perspective

True-False Questions

1. Another name for a capital gain is yield.

Ans: False
Difficulty: Easy
Ref: Return

2. Return and risk are inversely related.

Ans: False
Difficulty: Easy
Ref: Risk

3. The less the variability of return, the greater the risk.

Ans: False
Difficulty: Easy
Ref: Risk

Chapter Six 77
The Risks and Returns from Investing
4. Bond prices and interest rates are inversely related.

Ans: True
Difficulty: Moderate
Ref: Risk

5. It is generally easier to predict interest rate risk than market risk.

Ans: True
Difficulty: Difficult
Ref: Risk

6. New regulations concerning auto emissions would be a type of market risk for the
auto industry.

Ans: False
Difficulty: Moderate
Ref: Risk

7. International mutual funds offer investors global diversification without exchange

rate risk.

Ans: False
Difficulty: Difficult
Ref: Risk

8. A Chinese stock denominated in Chinese yuan will have an increase in its

dollar-denominated return if the Chinese yuan strengthens against the dollar.

Ans: True
Difficulty: Difficult
Ref: Taking A Global Perspective

9. Holding interest rates constant, a narrowing of the equity risk premium implies a
decline in the rate of return on stocks because the amount earned beyond the risk-
free rate is reduced.

Ans: True
Difficulty: Moderate
Ref: Summary Statistics for Returns

10. The most common measure of inflation is the Producer Price Index.

Ans: False
Difficulty: Easy
Ref: Summary Statistics for Returns

Chapter Six 78
The Risks and Returns from Investing
11. The standard deviation of returns, calculated as the square root of the variance of
returns, is a measure of total risk of an asset or portfolio.

Ans: True
Difficulty: Moderate
Ref: Measuring Risk

12. Both present value and future value are based upon the concept of the time value
of money.

Ans: True
Difficulty: Easy
Ref: Compounding and Discounting

Short-Answer Questions

1. Assume you are a U. S. citizen who purchases $20,000 worth of bonds of the
Deep Shaft Mining Company in Kenya. What sources of risk can you identify
with this investment?

Answer: Business risk, country risk, political risk, exchange-rate risk.

Difficulty: Moderate
Ref: Types of Risk

2. What common variable is used in the calculation of both the cumulative wealth
index and the geometric mean return? How is the common variable calculated?
How is it used in each?

Answer: Return (R) is used in both calculations.

R = [CFt + (PE - PB)]/PB.
CWIn = WI0 (1 + R1)(1 + R2) . . . (1 + Rn)
G = [(1 + R1)(1 + R2) . . . (1 + Rn)] 1/n - 1
Difficulty: Difficult

3. When should an investor use the arithmetic mean return? The geometric mean
return?

Answer: The arithmetic mean is better for single period returns, whereas, the
geometric mean is better for multiple periods. Furthermore, the arithmetic
mean is better for investors that rebalance their holdings, whereas the
geometric mean is better for investors that buy and hold.
Difficulty: Moderate

Chapter Six 79
The Risks and Returns from Investing
4. What is the best measure of risk for a sole proprietorship?

Answer: The best measure of risk for a sole proprietorship (a single asset) is
standard deviation of returns to capture total risk, since there is no
diversification.
Difficulty: Moderate

5. What was the effect on foreign investors owning U.S. stocks when the dollar fell
in 2008?

Answer: Foreign investors owning U.S. stocks suffered from the unfavorable
currency movement as well as decline in the U.S. stock markets.
Difficulty: Moderate

Fill-in-the-blank Questions

1. CFt + (PE - PB) CFt + PC

TR = -------------- = ---------
PB PB

where
CFt = ______________________________________________
PE = ______________________________________________
PB = ______________________________________________
PC = ______________________________________________

Answer: cash flows during measurement period t, price at the end of period t (or
sale price), purchase of asset or price at the beginning of the period,
change in price during the period
Difficulty: Moderate

Critical Thinking/Essay Questions

1. The returns and risk measures in this chapter are calculated from historical data.
Are such measures good predictors of the future? What are some circumstances
that could change to impact future return and risk? How can an investor use these
return and risk measures to help construct a portfolio?

Answer: Historical risk and returns are a starting point for the analyst to assess
future prospects. The return and risk parameters for individual companies
can change due to changes in management, product decisions,
competition, regulation, changes in financial structure, etc. An analyst can
use historical data and temper it with judgment about the future for
constructing a portfolio.
Difficulty: Moderate

Chapter Six 80
The Risks and Returns from Investing
2. What is the major drawback of a return measure? Why is it the most common
return calculation used by investors?

Answer: The return measure does not consider the change in the value of the
currency over time. Since many investors do not consider inflation in their
calculations, and the total return measure is a quick way to measure return,
it is widely used by investors.
Difficulty: Moderate

Problems

1. A stock is purchased for $50 on January 1 and sold on December 31 for $72. A
$5.00 per share dividend is paid at the end of the year.

(a) Calculate the R.

Solution: (a) R = (Dividend + Change in Price)/ Beginning Price

= ($5 + $22)/$50 = 0.54 or 54 percent

Difficulty: Moderate

2. The S&P 500 showed the following Rs for a 6 year period: 11.1 percent, -5.2
percent, 20.3 percent, 26.7 percent, -12.4 percent, and 2.2 percent.

(a) Calculate the arithmetic mean return for the 6-year period.
(b) Calculate the geometric mean return for the 6-year period.

Solution: (a) Arithmetic mean = X/n = [11.1 + (-5.2) + 20.3 + 26.7 + (-12.4) + 2.2]/6
= 42.7/6 = .0712 or 7.12 percent

(b) To calculate the geometric mean, convert to RRs and obtain the product of the six
RRs.

G = [1.111 x .948 x 1.203 x 1.267 x .876 x 1.022]1/6 - 1

= [1.4372] 1/6 - 1 = 1.0623 - 1 = .0623 or 6.23 percent

Difficulty: Difficult

3. Calculate FV of $100,000 at the end of 64 years given an interest rate of 10.38%.

Solution: Future Value = Present Value (1 + r)n

= $100,000 (1.1038) 64
= $100,000 (555.8849840) or on a financial calculator:
= $55,588,498.40 100000 PV, 64N, 10.38 Int,
Solve for FV = $55,588,498,40
Difficulty: Easy

Chapter Six 81
The Risks and Returns from Investing
4. John Crossborder buys 1 share of Telmex at 140 pesos when the value of the peso
is stated in dollars at $0.35. One year later, Telmex is selling for 155 pesos and
paid a dividend of 5 pesos at yearend. If after one year the value of pesos is
$0.29, what is John's rate of return in U. S. dollars?

Solution: Return Relative in pesos = [(155 - 140 + 5)/140] + 1.0 = 1.1429

Domestic R = 1.1429[0.29/0.35] - 1 = -0.0531 or -5.31%

Difficulty: Difficult

5. If you deposit $1,000 today at 12 percent, how much will you have in 10 years?

Solution: Using a financial calculator: 1000 PV, 12 interest rate, 10 N,

solve for FV = $3,105.85

Difficulty: Easy

6. What is the present value of $20,000 to be received in 40 years if the interest rate
is 9 percent?

Solution: Using a financial calculator: 20000 FV, 9 interest rate, 40 N,

solve for PV = $636.75

Difficulty: Easy

Chapter Six 82
The Risks and Returns from Investing
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 Vimiera Almarez Orthes
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This splendid memorial is constructed of fine Grinshill stone; the total

expence, including the cottage and other incidentals, amounted to
£5973. 13s. 2d. which was raised by a subscription throughout the
county.
Within the shaft is a staircase of 172 steps, forming a well in the
centre, each step having an iron baluster with a gilt letter inserted on
a small panel, which gives the following inscription:—

“This staircase was the gift of John Straphen, the builder, as his
donation towards erecting this Column. The first stone of the
foundation was laid December 27th, 1814, and completed June
18th, 1816, the anniversary of the glorious Battle of Waterloo.”

The column may be ascended by a gratuity to the keeper, who

resides in a neat Doric cottage adjoining.
From the railing at the top is a delightful panoramic view of the fertile
plain of Shropshire, to which the bold appearance of Shrewsbury, and
its once formidable Castle mantled with leafy verdure, forms a
prominent contrast.
The surrounding distances are replete with interest, being composed
of fine undulating hills and mountains. Proceeding northward, the
eye ranges over the Nesscliff and Selattyn hills, the mountainous tract
of the Berwyn, the luxuriantly crowned summit of Pimhill, the wild
and romantic rock of Grinshill, and the gentler eminences of
Hawkstone, whose tasteful plantations and noble woods are seen at
a distance of twelve miles, among which rises the “Obelisk,” erected
to the memory of Sir Rowland Hill, the first Protestant Lord Mayor of
London.
In the foreground north-east is the plain, renowned in history, and
immortalized by Shakspeare in dramatic poetry, as the scene of the
great and important Battle of Shrewsbury, in 1403, in
commemoration of which Henry IV. piously founded a church, called
to this day “Battlefield,” the well-proportioned tower of which is easily
distinguished.
The turrets of the modern castellated mansion of Sundorne are
particularly striking, and remind us of the beautiful lines of Mrs.
Hemans—

The stately Homes of England,

How beautiful they stand!
Amidst their tall ancestral trees,
O’er all the pleasant land.

Further eastward are the venerable and truly picturesque ruins of

Haghmond Monastery, founded in the year 1100, for canons of the
order of St. Augustine. Near the remains of this once more noble pile
is the wooded ascent of Haghmond Hill, and its conspicuously placed
Shooting Tower, beneath which is the retired village of Uffington and
its primitive church.
Direct east stands exalted in noble majesty the isolated Wrekin, the
natural Heart of Shropshire, in front of which appears the exuberant
foliage surrounding Longner Hall. Directing the eye southwards, is
Charlton Hill, bounded by the towering summit of the Brown Clee
(1820 feet in height), and the Lawley, Acton Burnell Park, Frodesley,
and other Shropshire hills, among which is the lofty Caerdoc,
otherwise Caer Caradoc, where Caractacus (the last of the original
British princes) is said to have displayed his patriotism and daring
spirit against the united efforts of the Roman forces.
Onward in the horizon, beyond a remote cultivated country, is the
Longmynd with its straight outline, and the Stiperstones, topped by
rocks, similar to the august relics of castellated grandeur; these are
connected by the Bromlow and Long Mountain; and the panorama
terminates with the lofty mountains of Breidden, Cefn y Cayster, and
Moelygolfa, which, with more distant eminences, form a fine back-
ground to a portion of the town, while the middle distance all around
is unequalled for richness and fertility.
Nor, whilst extolling the environs and distant scenes around, let us
forget the immediate vicinity of the Column: its verdant pastures,
sequestered lanes, stately trees, and rural scenery, are surpassed by
none so near a populous county town.
 THE TOWN AND COUNTY GAOL

Is situated on a dry, beautiful, and salubrious eminence, a short

distance from the Castle.
The front of the prison displays rather a bold appearance, having two
rusticated stone lodges and a gateway in the centre; over the latter is
a bust of the philanthropic Howard, by Bacon.
The interior possesses every necessary convenience appropriate to its
purpose that sagacity and humanity can devise. It is spacious, airy,
and well supplied with water, by means of a pump worked by the
prisoners.
The governor’s house faces the gateway, and forms the southern
front of the building. The chapel stands in the centre of the whole,
and is lighted by a lantern surmounted by a gilt cross. It is
octagonal, and contrived that while all the prisoners may see the
clergyman, every class is so separated as to be hid from each other.
The prison is further divided into eight principal courts, besides other
smaller ones; these are surrounded by cloisters with groined arches;
above these are the sleeping cells, the communication to which is by
railed galleries. A due regard to the gradations of vice is strictly
observed in the classification of the prisoners, most of whom are
occupied during the day in some little manufactory or useful
employment, by which habits of industry are acquired that may
protect them from temptations to plunder or misconduct when
released from confinement.
Executions take place on the roof of the porter’s lodge.
The prison was begun in 1787, and completed (from a plan by Mr.
Haycock) in 1793, at an expense of about £30,000. The entire
building is surrounded by a strong brick wall, flanked with rusticated
stone buttresses.
 THE BUTTER AND POULTRY
MARKET,

on Pride-hill, was erected in 1819 by voluntary contributions

amounting to £2000. It is a building unworthy our town and the
ample produce brought to its weekly markets. In 1830 it was
adjudged to be taken down as being unsuitable and incommodious.
A meeting was held to arrange for a new building upon an improved
plan, the money to be raised by shares of £25 each, but
circumstances prevented this desirable undertaking, which is much to
be regretted, as complaints have long been made of the obstruction
in the thoroughfare (which is often attended with delay and danger)
on market and fair days, by persons exposing their goods and
marketables for sale in the street.
 THE CIRCUS BUTTER & CHEESE
MARKET,

from its situation near the Welsh Bridge, possesses superior

advantages for the conveyance of goods and general trade. It was
opened about the year 1822 by Mr. H. Newton.
 THE NEW BUTTER AND CHEESE
MARKET

Is an elegant and commodious edifice situated in Howard-street,

Castle-foregate, and possesses every requisite convenience for the
disposal of butter, cheese, and other agricultural produce, and
merchandize.

The exterior consists of a centre and two wings, the centre forming
the portico and principal entrance, which is decorated with two
Grecian columns and entablature. The whole of the front is
cemented, and possesses an unity of parts and a boldness of
proportion unusual in buildings of this description.
The interior is divided into two stories, the lower or basement being
vaulted with groined arches springing from brick piers, which afford
an equality of height in almost every part. The entrance to the
basement is on the north side, and (owing to the fall in the street) is
of sufficient height to admit a waggon. The canal is on the south
side, and nearly level with the floor of the basement, to which there
is a communication, affording a ready transit for goods.
The upper or principal floor of the Market contains an area of 5400
feet; the roof is supported by four rows of iron pillars; the centre part
being raised nine feet, has a range of windows on each side, by
which a proper ventilation is obtained as well as additional light.
Attached to the upper end of the building is a second entrance,
communicating with an office for the clerk of the market.
The first stone of the edifice was laid by Mr. W. H. Griffiths, May 28th,
1835, and was completed by that time in the next year, in a manner
creditable to the architects, Messrs. Fallows and Hart, of Birmingham.
 THE SALOP INFIRMARY.

Among the various channels through which the stream of christian

benevolence pursues its fertilizing course to the ocean of charity,
those Institutions which have for their express design the cultivation
of the mind and the alleviation of misfortunes which the casualties of
life and the infirmities of human nature render mankind alike heir to,
afford undoubtedly the safest application of real beneficence, being,
in a measure, free from that imposition with which an indiscriminate
charity has unfortunately so often to contend.

From the most remote period the virtuous breast has cultivated the
sublime desire of mitigating, as far as possible, the pain and
wretchedness consequent upon disease and suffering,—hence we
find that the munificence which characterised our forefathers
centuries ago was not altogether confined to the erection of
numerous places for Divine Worship, and for which our town was
early distinguished, but that the pleasing pain of sympathy prompted
them also to build and endow “Hospitals” for the reception of the sick
and diseased, and “Almshouses” for the aged and infirm. The first
record we possess of the existence of such charitable institutions in
Shrewsbury is as early as the time of Henry the Second, beside an
“Infirmary” founded by Earl Roger de Montgomery, within the
precinct of the “Abbey,” as an asylum for diseased and superannuated
monks, a fragment of which erection yet remains.
The rapacity, however, which disgraced the dissolution of Monasteries
and whatever sustained the character of a “Religious House,” has,
with a solitary exception, rendered these ancient Hospitals defunct;—
nor was it until the commencement of the last century that the
attention of the public was particularly directed to the foundation of
Hospitals or Infirmaries, and which, from the number of hospitals
erected in the course of that period, will, no doubt, be a memorable
age in the annals of Medical Charities;—whilst it may be no mean
compliment to our town and county to mention that its inhabitants
early caught the rising spark of this generous flame, and had the
distinguished honour of being the fifth in the kingdom to form the
way in establishing a Provincial Asylum, on the basis of public
benevolence,—the Salop Infirmary having commenced its salutary
operations April 25th, 1747.
The building which preceded the present stately erection having been
originally designed for a private residence, and although repeatedly
enlarged and improved, being found to be insufficient for the
accommodation of the additional number of patients consequent
upon an increasing population, as well as inconvenient in many
respects for the purpose it was designed to fulfil, it was resolved, at a
meeting held Nov. 16, 1826, that a new Infirmary should be built on
the site of the old one, at the estimated cost of about £16,000. As
there was, however, much disinclination on the part of the
subscribers present to take so large a sum from the funds of the
institution, a considerable portion of which, having been bequeathed
for its support, was therefore deemed sacred, a subscription was
resolved upon and commenced immediately, when no less than
£4,666 was subscribed by the noblemen and gentlemen then
present,—a truly noble example of Salopian Generosity.
In the month of April, 1827, the patients were removed to a
temporary infirmary, arranged in the Shrewsbury House of Industry;
upon which workmen immediately commenced taking down the old
building, and with such speed that on the 19th of July, the
anniversary of our late revered monarch’s coronation, the ceremony
of laying the first stone of the new structure was performed by the
Right Hon. Lord Hill, assisted by the late Venerable Archdeacon
Owen, some of the committee, with the contractors and surveyor.
The building thus auspiciously begun, proceeded rapidly to a
completion so as to be opened on September 16, 1830. It is of free-
stone, and of a plain Grecian character in design, 170 feet long by 80
feet high, having a Doric portico in the centre, the ends projecting
with pilasters at each angle. At the top of the building, on a tablet, is
the following inscription:—

SALOP INFIRMARY,
Established 1745,
Supported by Voluntary Subscriptions and Benefactions.
Rebuilt 1830.

The interior comprises four stories; in the basement story the offices,
to the number of twenty-two, are well arranged, having a convenient
court for coal, &c. and water supplied to the several apartments. The
principal floor is appropriated to the board room, dispensary, waiting
room for the patients, and admitting rooms for the faculty, with
private apartments for the house-surgeon and matron, and two
wards for surgical cases.
The first floor is for male patients, and consists of seven wards, with
a day-room, scullery, and bath rooms: the upper floor, for female
patients, has the same accommodation, with the addition of a large
and lofty operation room, enclosed by two pair of folding doors,
having wards on each side; in the attics are four other wards, with
nurses’ rooms, &c. The ascent to these apartments is by staircases
situated at each end of the building, connected by spacious galleries,
which afford the means of free ventilation.
In addition to the conveniences with which this elegant structure is
replete, the patent hot-water apparatus, erected for the purpose of
warming the Infirmary, must not be overlooked. The apparatus
consists of a boiler, placed in the basement floor of the building, from
which, by means of a pipe rising from its top, the water heated
therein is conveyed to the highest level required, from whence it
descends (in its passage to the boiler) to what are called the water
stoves, situated in the several galleries. By this mode of heating the
several apartments, opportunity is afforded not only of having a
supply of hot water to each scullery, bath, and floor, but nightly
attendance to the fire is rendered altogether unnecessary.
Whilst the interior accommodations of the Infirmary are highly
conducive to the health and comfort of the inmates, the external
arrangements are so constructed that such of the patients as are able
may possess every benefit resulting from exercise and pure air, a
spacious terrace having been constructed, and extending beyond the
length of the eastern front, from which a most expansive and
interesting view presents itself. In short, the whole of the
arrangements of the new Salop Infirmary are admirably adapted for
the purpose they are designed to fulfil, and whilst the workmanship,
the materials, and general construction are of the best description,
and reflect the highest credit on the several contractors, the building
it is to be desired will, from its site and general formation, remain a
lasting monument not only of Salopian liberality, but of general
usefulness.
The building was designed by Messrs. Haycock, of this town, and the
total expence of its erection was £18,735. 18s. 10d. of which sum
£13,044. 1s. 3d. was raised by public subscriptions and collections,
the balance being made up by the sale of a part of the capital stock
of the institution. The Infirmary is liberally supported by
subscriptions and benefactions. From its establishment to
Midsummer, 1835, the sum of £164,220. 11s. 3d. has been received
for its support; 44,058 in-patients admitted, and 72,328 outpatients
recommended as fit objects for its benefits.
The average annual expence is about £2230, and the weekly number
of patients in the house 82; and 2429 outpatients were relieved in
1835.
A treasurer is annually chosen, and the affairs of the house are
managed by eight directors, assisted by a secretary. The directors
are chosen from the trustees, who are subscribers of two guineas
and upwards per annum, of whom four retire from their office half-
yearly.
The domestic arrangements are under the care of a matron; and a
surgeon with a salary is resident in the house, so that medical aid
may be always at hand.
The medical officers of the establishment gratuitously devote their
time and apply their skill in promoting the benevolent design of the
institution.
The clergy of the town officiate by turns weekly as chaplains to the
house. And two weekly visitors from the resident subscribers go
round the wards, by which the patients have an opportunity of
stating any dissatisfaction that may exist, and having it reported to
the board of directors, who assemble every Saturday morning for the
dispatch of the ordinary business of the charity and the admission
and discharge of patients.
Every patient must be recommended by a subscriber, except in the
case of casualties.
The anniversary meeting is held in the Hunt week; when a numerous
assemblage of noblemen and gentlemen accompany the treasurer
from the Infirmary to St. Chad’s church, where a sermon is preached
and a collection made in aid of its funds, which always produces a
sum truly honourable to the county.
Several tables of legacies and benefactions for the support of the
Infirmary are fixed on the walls of the board room; and the cornice is
adorned with a series of armorial bearings of all the noblemen and
gentlemen who have filled the office of treasurer to the institution.
An auxiliary fund is attached to the hospital, for the purpose of
assisting convalescent in-patients in returning to their homes.
 EYE AND EAR DISPENSARY.

It would be superfluous to offer any observations on the importance

of the two senses of Vision and Hearing, or on the prevalence of the
various disorders to which the organs of those senses are liable; and
whilst a general resource has been provided for the poor in the noble
institution just noticed, for such diseases and accidents as they might
be afflicted with, it has been thought expedient to form separate
institutions for the relief of such disorders or defects in the human
frame as are found more prevalent; since by directing medical and
surgical skill to one particular object, efficient results may be the
more easily obtained. To further this design, the Shropshire Eye and
Ear Dispensary was established in 1818. During seventeen years of
its progress 3583 patients have been admitted, and, as among these
several have been restored to the blessing of sight, the institution is
deserving of public support.
The dispensary is held in Castle-street, under the care of a surgeon.
Annual subscribers of one guinea have, according to the original
resolution, the right of recommending two patients within the year;
but this is not in all cases strictly adhered to.
 ST. GILES’S HOSPITAL,

it is considered, was originally established for the reception of

persons afflicted with leprosy—a disease much more common among
the ancients and in warmer climates than in Europe, into which it is
said to have been introduced by the Crusaders in the time of Henry
the First. King Henry the Second, if not the founder of this hospital,
granted to it 30s. yearly (equal to £80 of modern currency) of the
rent which he received from the sheriff of Shropshire for the county,
towards the support of the infirm or diseased occupants, as well as a
small toll upon all corn and flour exposed to sale in Shrewsbury,
either on market days or otherwise. The original grant of money is
still paid by the sheriff to the Earl of Tankerville, who, as “Master of
the Hospital,” and holding certain lands for its maintenance,
nominates four hospitallers, who have each a comfortable house and
garden, adjoining St. Giles’s church-yard, with one shilling and
sixpence weekly, a small allowance for coal, and clothing annually.
 ST JOHN’S HOSPITAL,

although an asylum “for honest poverty and old age,” did not escape
the rapacity which characterised the dissolution of religious houses.
It stood in the suburb of Frankwell, near a place since called The
Stew. Speed notices its site in his map (1610); but not a fragment of
the building now remains.
 THE DRAPERS’ ALMSHOUSES.

The generally received opinion has been that these almshouses were
founded, in 1461, by Degory Watur, Draper, from the circumstance
that he lived himself in the centre house, or “almshouse hall,” among
the poor people, and whose practice (as a Manuscript Chronicle
records) was to attend them “dailye to our Lady’s Chirch, and to
kneel with them in a long pew in the quire made for them and
himself.”
The ancient records, however, of the Drapers’ Company show that a
building and endowment of almshouses by that company for poor
people existed long previous to the foundation attributed to Degory
Watur, who seems to have been only the founder in so far as their re-
erection took place, under his management, during his wardenship or
stewardship of the company, of which he was a member.
The old almshouses extended along the whole of the west side of St.
Mary’s church-yard: and, being much dilapidated and very
incommodious dwellings, they were taken down in 1825. The
present building, completed in the above year, from a design by Mr. J.
Carline, now consists of eighteen comfortable habitations, of two
chambers each; the front is in the old English style of architecture,
having in the centre a gateway within an embattled tower; in the
centre of the latter are the armorial bearings of the Drapers’
Company, with the motto “Unto God only be honour and glory.”
This re-edification, including the purchase of the land, cost the
Drapers’ Company upwards of £3000, from whose funds each of the
poor people receive annually about six pounds.
 ST. CHAD’S ALMSHOUSES

adjoin the cemetery of Old St. Chad’s, and were erected in 1409 by
Bennett Tipton, a public brewer, who lived in the College, and died in
1424. The allowance to the eleven poor occupants, “decayed old
men and women,” arises chiefly from a benefaction of £180 by David
Ireland, alderman of the town, and Catharine his wife; which is now
commuted to a rent charge of £8 on the Lythwood estate, the
proprietor of which nominates the alms-folk. Previous to the
Reformation the poor people received one penny a-week from the
Mercers’ Company, since which time the whole annual payment of the
Company has been only two shillings and two pence.
 HOUSE OF INDUSTRY.

This spacious and well-built structure stands on an eminence rising

from the Severn, which forms a beautiful object beneath. The site is
highly salubrious, and the prospect delightfully variegated by many
natural beauties. The majestic Wrekin, with an extensive tract of
country, is seen to the right; while the front presents a very general
view of the town, skirted by genteel residences partly obscured by
the foliage of The Quarry trees, which, with the towers of the Castle,
the lofty steeples of the churches and their glittering vanes, unite in
producing a scene diversified and impressive, especially when the
evening sun illumines the landscape, and gives to it that variety of
light and shadow which poets have associated as only belonging to
the scenes of enchantment and fairy land.
A fine terrace extends the whole length of the building, which was
erected (in 1760) for the reception of orphans from the Foundling
Hospital in London, at an expence of £12,000; but the funds of that
institution not proving adequate to the plan of sending children to
provincial hospitals, it was discontinued in 1774. It afterwards served
as a place of confinement for Dutch prisoners taken in the American
war; and in 1784 it was purchased under an act of parliament for
incorporating the five parishes of the town and that of Meole Brace in
the liberties, so far as concerned the maintenance of the poor, as a
general House of Industry for their admission and employment, under
the management of a board of directors.
Various circumstances, however, have concurred to render the
establishment a complete failure, both as regards the principles on
which it was founded, the economy to be effected, and the
advantages eventually to result in favour of the united parishes, the
select vestries of which now send but a small proportion of their poor,
and those are generally infirm, who are maintained by a contractor,
at a certain rate per head per week; but “averages” are still paid by
the several parishes, to keep the extensive buildings in repair, for a
salary to the chaplain, and other purposes of the institution, which
continues under the ostensible government of directors.
The dining hall is 115 feet in length, parallel with which is a chapel of
the same size, in which service is performed once every Sunday.
 HUMANE SOCIETY.

A Humane Society existed in this town in the year 1786, but, having
sunk from notice, was resuscitated in 1824, for the purpose of
preventing those fatal accidents which have been of frequent
occurrence during the bathing season, and often in the winter time,
when the river in a frozen state affords the amusement of skaiting.
The purpose of the society is to render prompt assistance in the use
of the most approved means for restoring suspended animation, from
whatever cause arising, and the rewarding of persons whose humane
and intrepid exertions have been instrumental in saving life, or,
although unsuccessful, such as to entitle their endeavours to the
thanks of society.
To accomplish these objects, watchmen, prepared with every
requisite apparatus, are stationed on the banks of the river, where
accidents at any time may be expected to occur, and receiving houses
are established, where every facility is afforded to employ remedies
for the restoring of life in those cases which hold out the slightest
hope of a recovery.
It may be mentioned that many instances have occurred by which a
just estimate can be formed of the positive good resulting from the
exertions of this Society, in rescuing persons from drowning.
 THE PRISON CHARITIES

were commenced about the year 1800, for the distribution of rewards
to promote the reformation and encourage the industry of criminals
confined within the prison walls; to relieve the wants of unfortunate
debtors; and to provide all those who are dismissed from prison with
a small sum for immediate maintenance, so as to prevent the great
temptation of committing crime for that purpose.
The annual subscription is limited to one guinea; and the institution
has met with a laudable support, principally among the gentry of the
county.
 THE PAROCHIAL CHARITIES

of this town have at different times been largely endowed by the

legacies of individuals who, in bidding the world adieu, were piously
moved to leave portions of their substance to be expended in “bread
to the poor,” clothing and apprenticing poor children, annual gifts of
money and garments to decayed housekeepers, and the general
improvement of all, by directing commemorative sermons to be
preached on particular anniversaries. In St. Chad’s parish two
hundred threepenny loaves are, on the average, distributed weekly
throughout the year.
 THE TOWN CHARITIES

were bequeathed for purposes in many respects similar to the

foregoing, and were under the management of the old Corporation;
but by the provisions of the Municipal Act the distribution of them is
vested in trustees appointed by the Lord Chancellor.
Several other charitable societies exist in the town, whose object is to
afford gifts of money, clothing, medical assistance, and religious
instruction, to the necessitous sick poor; as well as for the
distribution of the scriptures and the public formularies of the
established church, and for the propagation of christianity both at
home and abroad, the detail of which would exceed the prescribed
limits of this publication.
 CHARITY SCHOOLS.

“TO LEARNING’S SECOND SEATS WE NOW PROCEED.”

BOWDLER’s, OR THE BLUE SCHOOL,

Is situated in Beeches Lane, and is an oblong brick building, having in
the centre a glazed cupola, surmounted by a flying dragon. It was
founded in 1724, according to the will of Mr. Thomas Bowdler,
alderman and draper, for the instruction, clothing, and apprenticing
poor children of the parish of St. Julian.
Eighteen boys and 12 girls receive their education here, and attend
service at St. Julian’s church on Sundays, to which church Mr.
Bowdler was a great benefactor.—The number of scholars, from the
increased value of the property belonging to the school, is about to
be increased.

MILLINGTON’s SCHOOL & HOSPITAL.

This excellent institution and monument of private munificence
stands on an eminence in the suburb of Frankwell, which commands
an extensive prospect of the town, its churches, public buildings, and
more distant views.
The building consists of a handsome pedimented front, with a stone
portico, and two wings attached to the centre by a row of houses;
the summit is crowned by a bell turret.
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