CHAPTER XIX.

EXCHANGE.

372. A draft or bill of exchange is a written order directing one person to pay a specified sum of money to another.

Thus, if B. Smith of Portland owes S. Brown of Boston $500; when the debt becomes due, Smith procures a draft from a bank in Portland on a bank in Boston, and sends it by mail to Brown of Boston. The bank in Portland makes the draft payable to the order of B. Smith (unless otherwise directed), and Smith writes on the back of the draft, "Pay to the order of S. Brown," and signs it. On receipt of the draft, Brown takes it to his bank in Boston, writes his name across the back of the draft, and receives his money.

373. A time draft is a draft payable at a specified time after sight (or date).

When the person on whom a time draft is drawn accepts a draft, he writes the word "Accepted," with the date, across the face, and signs his name. The draft is then called an acceptance, and the acceptor is responsible for its payment.

An acceptance is of the nature of a promissory note, and when discounted the discount is calculated for the specified time and three days of grace.

374. The system of paying debts due to persons living at a distance, by transmitting drafts instead of money, is called exchange.

The rate per cent which the cost of a draft is more or less than its face is called the rate of exchange.

The comparative value of the coins of different countries is called the par of exchange.

The par of exchange as modified by the rate of exchange is called the course of exchange.

(1) Find the cost of the following draft, exchange being of 1% premium, and interest 6%.

$800.

CINCINNATI, O., Feb. 8, 1881.

Thirty days after sight pay to the order of S. Clark eight hundred dollars, and place to the account of

(2) Find the cost of a draft for $400, payable 60 days after sight, exchange being of 1% discount, and interest 7%.

4.90 discount at 7% for 63 days. $395.10 proceeds of draft (cost at par).

$400.00

.01225 of $400

=

.0025 of $400

=

1.00 discount at of 1%.

$394.10 cost of draft.

(3) Find the face of a draft, payable 30 days after sight, that can be bought for $1000, exchange being of 1% premium, and interest 6%.

1. Find the cost of a draft on New York for $1100, at of

1% premium.

2. Find the cost of a draft on New Orleans for $1350, at

of 1% discount.

3. Find the cost of a draft for $1600, payable 30 days after sight, when exchange is of 1% premium, and interest 6%.

4. Find the cost of a draft for $500, payable 60 days after sight, when exchange is of 1% discount, and inter

est 7%.

5. Find the cost of a draft for $1200, payable in 90 days. after sight, when exchange is of 1% premium, and interest 7%.

6. Find the cost of a draft for $950, payable in 30 days, when exchange is at par and interest 44%.

7. Find the cost of a draft for $725, payable in 60 days, when exchange is at of 1% discount, and interest 5%.

8. Find the cost of a draft

when exchange is at

51%.

for $810, payable in 90 days,

of 1% premium, and interest

9. Find the face of a draft, payable 30 days after sight, that can be bought for $274, when exchange is at par, and interest 6%.

10. Find the face of a draft, payable 60 days after sight, that can be bought for $1250, when exchange is at of 1% premium, and interest 7%.

11. Find the face of a draft, payable 60 days after date, that can be bought for $1125, when exchange is at of 1% discount, and interest 51%.

12. Find the face of a draft, payable 30 days after date, that can be bought for $520, when exchange is at of 1% premium, and interest 4%.

13. Find the face of a draft, payable 90 days after date, that can be bought for $10,000, when exchange is at par, and interest 4%.

FOREIGN EXCHANGE.

(1) Find the cost of a draft on London for £502 12s., in New York, when sterling exchange is quoted at 4.85.

(2) Find the face of a draft on London that can be bought for $2425.77, when sterling exchange is quoted at 4.85.

$2425.77 $4.85 = 500.2.

£500.2 £500 4s. Ans.

EXERCISE LXXV.

1. Find the cost of a draft on London for £320 10s. 6 d., when sterling exchange is quoted at 4.83.

2. Find the cost of a thirty-day draft on London for £150, when thirty-day bills are quoted at 4.82, and the broker's commission is of 1% of cost of draft.

3. Find the cost of the following draft, when sixty-day bills are quoted at 4.81, and the broker's commission is of 1% of cost of draft:

£500.

NEW YORK, Feb. 17, 1881. Sixty days after sight of this First of Exchange (Second and Third of the same tenor and date unpaid), pay to the order of James Wilson five hundred pounds, value received, and charge to account of

SIMON MORTON & Co.

NOTE. Foreign Bills are generally drawn in sets of three, of the same tenor and date, called First, Second, and Third of Exchange. These are sent by different mails to avoid loss or delay. When one is accepted or paid the others are void.

4. Find the face of a draft on Glasgow that can be bought for $2000, when sterling exchange is quoted at 4.84. 5. Find the face of a draft on Dublin that can be bought

for $135.24, when sterling exchange is quoted at 4.83. 6. How large a draft on London can be bought for $4000, when exchange is quoted at 4.86}.

Exchange on Paris is quoted at so many francs for $1.

Ex. What will be the cost of a draft on Paris for 7740 fr., when Paris exchange is quoted at 5.16?

7. Find the cost of a draft on Paris for 8000 fr., when Paris exchange is quoted at 5.12%, and brokerage is of 1%. 8. Find the cost of a draft on Paris for 10,000 fr., when Paris exchange is quoted at 5.14.

9. How large a sixty-day draft on Paris can be bought for $1500, when sixty-day bills are quoted at 5.11? 10. How large a sight draft on Paris can be bought for $2840, when Paris exchange is quoted at 5.13?

Exchange on Germany is quoted at so many cents for four reichmarks.

Ex. What will be the cost of a draft on Berlin for 4460 marks, when German exchange is quoted at .95?

11. Find the cost of a draft on Hamburg for 2876 marks, when German exchange is quoted at .951.

12. Find the cost of a draft on Munich for 12,000 marks, when German exchange is quoted at .94§.

13. How large a draft on Frankfort can be bought for $1200, when German Exchange is quoted at .95 ?