2. A note payable in 2 months is discounted at 2 % a month; what rate of interest is paid? Ans. 2525 %.

3. When a note payable in 90 days is discounted at 1 % a month, what rate of interest is paid?

Ans. 181

%.

4. What rate of interest corresponds to 5, 6, 7, 10, 12 % discount on a note running 10 months without grace?

5. What rate of interest does a man pay who has a 60 day note discounted at 2, 1, 2, 21, 3 % a month?

CASE IV.

579. Given, the rate of interest, to find the corresponding rate of bank discount.

1. A broker buys 60 day notes at such a discount that his money earns him 2 % a month; what is his rate % of discount?

cipal, $4.20 the interest, and 63 days the time, to find the rate per cent., which we do by (554) as in the last case. Hence the

RULE. I. Find the interest and the amount of $1 or $100 for the time the note has to run.

II. Divide the interest by the interest on the amount at 1 per cent. for the same time.

EXAMPLES FOR PRACTICE.

1. What rates of bank discount on 30 day notes correspond to 5, 6, 7, 10 per cent. interest?

2. At what rate should a 3 months' note be discounted to produce 8 % interest? 283 Ans. 71 %.

3. At what rates should 60 day notes be discounted to pay to a broker 1, 1, 2, 21 % a month?

4. At what rate must a note payable 18 months hence, without grace, be discounted to produce 7 % interest? Ans. 6,7 %.

EXCHANGE.

580. Exchange is a method of remitting money from one place to another, or of making payments by written orders.

581. A Bill of Exchange is a written request or order upon one person to pay a certain sum to another person, or to his order, at a specified time.

582. A Sight Draft or Bill is one requiring payment to be made "at sight," which means, at the time of its presentation to the person ordered to pay. In other bills, the time specified is usually a certain number of days "after sight."

There are always three parties to a transaction in exchange, and usually four:

583. The Drawer or Maker is the person who signs the order or bill;

584. The Drawee is the person to whom the order is addressed;

585. The Payee is the person to whom the money is ordered to be paid; and

586. The Buyer or Remitter is the person who purchases the bill. He may be himself the payee, or the bill may be drawn in favor of any other person.

and con

587. The Indorsement of a bill is the writing upon its back, by which the payee relinquishes his title, and transfers the payment to another. The payee may indorse in blank by writing his name only, which makes the bill payable to the bearer, sequently transferable like a bank note; or he may accompany his signature by a special order to pay to another person, who in his turn may transfer the title in like manner. Indorsers become separately responsible for the amount of the bill, in case the drawee fails to make payment. A bill made payable to the bearer is transferable without indorsement.

588. The Acceptance of a bill is the promise which the drawee makes when the bill is presented to him to pay it at maturity; this obligation is usually acknowledged by writing the word "Accepted," with his signature, across the face of the bill,

NOTES.-1. In this country, and in Great Britain, three days of grace are allowed for the payment of a bill of exchange, after the time specified has expired. In regard to grace on sight bills, however, custom is variable; in New York. Pennsylvania, Virginia, and some other States, no grace is allowed on sight bills, 2. When a bill is protested for non-acceptance, the drawer is obligated to pay it immediately, even though the specified time has not expired.

Exchange is of two kinds - Domestic and Foreign.

589. Domestic or Inland Exchange relates to remittances made between different places of the same country.

NOTE.-An Inland Bill of Exchange is commonly called a Draft.

590. Foreign Exchange relates to remittances made between different countries.

591. A Set of Exchange consists of three copies of the same bill, made in foreign exchanges, and sent by different conveyances to provide against miscarriage; when one has been paid, the others are void.

592. The Face of a bill of exchange is the sum ordered to be paid; it is usually expressed in the currency of the place on which the draft is made.

593. The Par of Exchange is the estimated value of the coins of one country as compared with those of another, and is either intrinsic or commercial.

594. The Intrinsic Par of Exchange is the comparative value of the coins of different countries, as determined by their weight and purity.

595. The Commercial Par of Exchange is the comparative value of the coins of different countries, as determined by their nominal or market price.

NOTE. The intrinsic par is always the same while the coins remain unchanged; but the commercial par, being determined by commercial usage, is fluctuating.

596. The Course of Exchange is the current price paid in one place for bills of exchange on another place. This price varies, according to the relative conditions of trade and commercial credit at the two places between which exchange is made. Thus, if Boston is largely indebted to Paris, bills of exchange on Paris will bear a high price in Boston.

When the course of exchange between two places is unfavor

able to drawing or remitting, the disadvantage is sometimes avoided, by means of a circuitous exchange on intermediate places between which the course is favorable.

DIRECT EXCHANGE.

597. Direct Exchange is confined to the two places between which the money is to be remitted.

598. There are always two methods of transmitting money between two places. Thus, if A is to receive money from B, 1st. A may draw on B, and sell the draft;

2d. B may remit a draft, made in favor of A.

NOTE. One person is said to draw on another person, when he is the maker of a draft addressed to that person.

CASE I.

599. To compute domestic exchange.

The course of exchange for inland bills, or drafts, is always expressed by the rate of premium or discount.. Drafts on time, however, are subject to bank discount, like notes of hand, for the term of credit given. Hence, their cost is affected by both the course of exchange and the discount for time.

1 What will be the cost of the following draft, exchange on Boston being in Pittsburgh at 2% premium?

$600.

PITTSBURGH, June 12, 1860. Sixty days after sight, pay to William Barnard, or order, six hundred dollars, value received, and charge the same to ou

account.

To the Suffolk Bank, Boston.

$1 + $.0225

=

OPERATION.

THOMAS BAUER & Co.

$1.0225, course of exchange.
.0105, bank discount of $1, (63 da.)

$1.012, cost of exchange for $1.
$600 × 1.012 $607.20, Ans.

ANALYSIS. From $1.0225, the $.0105, the bank discount of $1

=

course of exchange, we subtract for the specified time, and obtain

$1.012, the cost of exchange for $1; then $600 × 1.012= $607.20. the

cost of exchange for $600.

2. A commission merchant in Detroit wishes to remit to his employer in St. Louis, $512.36 by draft at 60 days; what is the face of the draft which he can purchase with this sum, exchange being at 2% discount?

OPERATION.

$1$.025 $.975,
=

course of exchange.
.01225, discount of $1.

$.96275, cost of exchange for $1.
$532.18+, Ans.

$512.36.96275 =

ANALYSIS. From $.975, the course of exchange, we subtract $.01225, the bank discount of $1 for the specified time, at the legal rate in Detroit, and obtain $.96275, the cost of exchange for $1; and the face of the draft that will cost $512.36, will be as many dollars as $.96275 is contained times in 512.36, which is 532.18+, times. Hence we have the following

RULE. I. To find the cost of a draft, the face being given.— Multiply the face of the draft by the cost of exchange for $1.

II. To find the face of a draft, the cost being given.-Divide the given cost by the cost of exchange for $1.

NOTE.-The cost of exchange for $1 may always be found, by subtracting from the course of exchange the bank discount (at, the legal rate where the draft is made), for the specified time. For sight drafts, the course of exchange is the cost of $1.

EXAMPLES FOR PRACTICE.

1. What must be paid in New York for a draft on Boston, at 30 days, for $5400, exchange being at % premium?

Ans. $5392.35.

2. What is the cost of sight exchange on New Orleans, for $3000, at 3% discount?

3. What must be paid in Philadelphia for a draft on St. Paul drawn at 90 days, for $4800, the course of exchange being 101 %? Ans. $4791.60.

4. A sight draft was purchased for $550.62, exchange being at a premium of 3%; what was the face?

5. An agent in Syracuse, N. Y., having $1324.74 due his employer, is instructed to remit the same by a draft drawn at 30 days; what will be the face of the draft, exchange being at 1% premium? Ans. $1310.22—.