I am a beginner in investment. I was reading Security Analysis (Sixth Edition) by Benjamin Graham, and on page 63 the last paragraph is written that:

A third kind of analytical conclusion may be illustrated by a comparison of Interborough RapidTransit Company First and Refunding 5s with the same company’s Collateral 7% Notes, when both issues were selling at the same price (say 62) in 1933. The 7% notes were clearly worth considerably more than the 5s. Each \$1,000 note was secured by deposit of \$1,736 face amount of 5s;

The last statement puzzled me. Is it a statement, or is it a quick calculation? I assume that 5% and 7% is referring to the annual yield rate. Thus, if the latter is bought for $\$1000$, then after a year it will grow to $\$1070$. To have the same result, the former should be bought as $\$1070\div 1.05\approx\$1019 $, which is nowhere near the value in the statement.

Thanks in advanced. :)


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