No. 1885. FORM OF A BANK CHECK. Harrisburg, May 10, 1895. Pay to Farmers' National Bank. Henry Good, One Hundred $100. 278. Promissory Note. or Order, Dollars. James Brown. A Promissory Note is a written promise to pay a specified person a specified sum at a specified time. The following form is that of an individual note, payable after date: $400 25 100. FORM OF A PROMISSORY NOTE. Pittsburg, Aug. 8, 1895. pay Three months after date, I promise to to the order of John without defalcation, value received. 25 100 Dollars, William Smith. EXCHANGE. 279. Exchange is the method of making payments in dis tant places by means of Drafts or Bills of Exchange. 280. A Draft is a written order for the payment of money. The Drawer is the person who signs it. The Drawee is the person requested to pay. 281. There are two kinds of exchange, Domestic and Foreign. Exchange between places in the same country is called Domestic Exchange; exchange between places in different countries is called Foreign Exchange. In domestic exchange a bill is usually called a Draft; in foreign exchange a bill is called a Bill of Exchange. 282. A Sight Draft is one payable on presentation. In some States, however, three days of grace are allowed. Bankers' drafts omit the words "at sight," and are payable on demand, without grace. value received, and charge to the account of To Rs. C. Ely & Co., Chicago, Ill. Geo. Reed & Co. Suppose William P. Dixon of Philadelphia owes James King of Chicago $500. He procures from the banking-house of Geo. Reed & Co. the above draft, on the back of which he writes "Pay to the order of James King," and signs his name. He then forwards the draft to James King, who presents it to R. C. Ely & Co., bankers, for payment. 283. A Time Draft is one payable at a specified time after sight or after the date of the draft. value received, and charge to the account of To James H. Cook, } J. R. Lee. 284. Acceptance of a time draft is agreeing to pay it when due. This is done by the drawee writing "Accepted" across the face, with the date and his name. 285. Exchange is said to be at a Premium or Above Par when a draft sells for more than its face value. Exchange is said to be at a Discount or Below Par when a draft sells for less than its face value. The rate of exchange between two places depends upon the relative conditions of trade at those places. If the trade between Boston and New Orleans is equal, the exchange is at par. If Boston owes New Orleans, the demand in Boston for drafts on New Orleans is greater than the supply, and they are therefore sold at a premium; but if New Orleans owes Boston, the supply of drafts on New Orleans in Boston is greater than the demand, and drafts on New Orleans, therefore, are sold at a discount. DOMESTIC EXCHANGE. 286. To find the cost of a draft. WRITTEN EXERCISES. 1. Find the cost of a sight draft for $800 when exchange is 11% discount. 2. Find the cost of a draft for $800, due 60 days after date, exchange being 14% premium. PROCESS. $1.00 .01 Dis. for 60 da. .99 .015 1.005 = = Cost of $1 at par. Cost of $1. 800 The bank discount of $1 for 60 da. is $.01. The cost of $1 at par is $1 - $.01 = $.99. The cost of $1, with the premium, is $.99 $.015, or $1.005. The cost of $800 will be 800 times $1.005, which are $804.00. 3. Find the cost of a sight draft for $2000, exchange being 11% premium. 4. Find the cost of a sight draft for $1600 when the exchange is 2% discount. 5. Find the cost of a draft for $5000, due 30 days after date, if exchange is 13% discount. 287. To find the face of a draft. WRITTEN EXERCISES. 1. What is the face of a sight draft which can be bought for $3045 when exchange is at 14% premium? If the premium is 14%, the cost of $1 will be $1.015. If the cost of the draft is $3045, its face will be as many dollars as $1.015 is contained times in $3045, which are $3000. 2. Find the face of a 60-day draft, with interest at 6%, which can be bought for $4030 when exchange is at a premium of 14%. The cost of $1 of exchange is $.99 + $.0175 = $1.0075. If the cost of the draft is $4030, its face will be $4030 divided by $1.0075, which is $4000. 3. What is the face of a sight draft which can be bought for $484.80 when exchange is at 1% premium? 4. What is the face of a sight draft which can be bought for $5174.40 when exchange is at 2% discount? 5. What is the face of a draft, due 60 days after sight, with interest at 6%, which can be bought for $1173 when exchange is 11% discount? 6. What is the face of a draft, due 90 days after sight, with interest at 5%, which can be bought for $1809 when exchange is 13% premium? 7. I can purchase a 60-day draft on San Francisco for $7830 when exchange is 14% discount; what is the face? |