2. Find the cost of a draft of $8400 on Chicago, at 2% discount. 3. B paid $1602 for a draft on New York at 3% premium. Find the face of the draft. SOLUTION: SHORT PROCESS: face. What is the face of a draft that costs: 4. $600, premium 1%? 6. $2000, premium 3%? 5. $1300, discount 5%? 7. $2000, discount 1%? 8. Find the cost of a 60-day draft of $1000 on Chicago, if interest is 6%, and the premium on Chicago is 2%. SOLUTION : 2. Int. on draft for 7 yr. at 6% I. - 26% of draft. 3. 100% of draft + 1% of draft - 31% of draft 99.45% of draft. 1. Since 100% of draft = $1000, II. 2. 1% of draft Too of $1000 $10, = = 9. What is the cost of a 30-day draft of $1100, premium 3%, and interest at 4%? 10. A 90-day draft of $2000 was purchased at a premium of 1% Find the cost of the draft, current rate of interest being 10%. 11. What will be the cost of a draft on El Paso for $600 payable in 60 days, exchange 13% discount, and interest at 8%? 12. Exchange for $480 cost a merchant $480.60. Find the rate of exchange. 13. Find the face of a 60-day draft purchased for $1500, exchange at 1% discount, interest at 6%. SOLUTION: 1. Bank discount (i.e., int.) on $1 for 63 days at 6% $0.0105. 2. Cost at par of each $1 of the draft $1– $0.0105 $0.9895. 3. Discount on each $1 of the draft $0.01 4. Cost of each $1 of the draft $0.9795. 5. $1500 + $0.9795 1531.39+. .. $1531.39+ = the face. = NOTE.—On time drafts, bankers allow bank discount, i.e., simple interest, for the time specified in the draft. This must be deducted from the cost. 14. Find the face of a draft, payable 30 days after date (without grace), that can be bought for $1000, interest 6%, and exchange 1% premium. 15. How large a draft, payable in 30 days after sight, can be bought for $352.62, exchange 12% discount, and interest at 6%? 16. A commission merchant sold $7500 worth of cotton. After deducting his commission of 11%, he remits the proceeds in a draft purchased at 3% premium. What was the face of the draft? (2) FOREIGN EXCHANGE 376. Foreign exchange is exchange between people in different countries. NOTE.—Drafts are expressed in the money of the country in which they are made payable. 377. A set of exchange is a draft drawn up in duplicate, named first and second of exchange, or “Original ” and “Duplicate," each copy being valid until one has been paid. When one is paid, the other is void. Formerly a draft drawn up in triplicate formed a set of exchange. At present, many banks issue only single drafts, but each draft is followed by a letter of advice. SET OF EXCHANGE £600. NEW YORK, Feb. 12, 1903. No. 87. At sight of this first of exchange (second of the RICHARD ROE. London, England. FORM OF THE FIRST DRAFT USED FOR TIME OR SIGHT COMMERCIAL BILLS ISSUED BY MERCHANTS AGAINST SHIPMENTS NOTE.—The second draft is precisely like this, except that the words“ first” and “second” change places. BROWN BRUYPAERSACO arrie in the jos Thirty days agter dater this rest bohura. Inveniul rupund pory to the interen Pohin Doe, One abundred and sevente Seven Counds 5/8 Sterling rutin rimerned white pitati versi TO NESSEBRowxsurat. fsugtid) 24 rao LANDON V. 1095 FORM OF DRAFT ISSUED BY ONE BANKER AGAINST ANOTHER BANKER NOTE.-In a genuine draft, the sum of £177 5s 4d would be written in the upper left-hand corner of the draft in place of the ciphers in the specimen. 378. The par of exchange is the estimated value of the monetary unit of one nation expressed in that of another. Thus, the par of exchange on London is 4.8665; that is, £1 in gold is worth $4.8665 in gold. The rate of foreign exchange varies continually, depending upon the demand. When English exchange is quoted at 4.90, it is above par; at 4.8665, it is at par; at 4.83, it is below par. 379. The par of exchange of the monetary units of: (1) England. (2) France. (3) Germany. £1 $4.8665. 1 franc $0.193. 1 mark $0.238. 4 marks $0.952. 380. Foreign exchange is generally quoted in the newspapers as follows, the prices varying: Demand. 60 days. 90 days. Sterling 4.84 (dollars for £1) 4.79 4.76 Francs 5.20 (francs for $1) 5.22 5.23 Marks 941 (cts. for 4 marks) 943 937 This means that a draft on England for £1 will cost $4.84, if payable on demand, or at sight; $4.79, if payable in 60 days; $4.76, if payable in 90 days. EXAMPLES 1. What will a 90-day draft for £50 cost? SOLUTION: 2. What will be the cost of a sight draft for 200 marks? SOLUTION: 3. Find the cost of a 60-day draft for 1044 francs. SOLUTION: 1 of $1 5.22' 2... 5.22 3. and 1044 francs cost 1044 x $200. 5.22 Exercise XLVI Using the quotations on p. 186, find the cost of: |