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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:
1. Since 100% of face face,
2. and 3% of face premium,
3. .: 1001% of face = $1602, the cost,
4. and 1% of face Tõot of $1602 = $16,
5. and 100% of face 100 x $16 = $1600.

SHORT PROCESS:
$1.003 cost of $1 face.
$1602 • $1.003 1600. . . $1600

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 :
1. Int. on draft for 1 yr. at 6% 6% of draft.

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,
3. and 99.45% of draft 99.45 * $10 $994.50.

=

=

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
same tenor and date unpaid) pay to the order of
Morley Bros., Six hundred pounds sterling, value
received, and charge the same to the account
of

RICHARD ROE.
To J. B. Don & Co.,

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 wordsfirstand “second” change places.

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FORM OF DRAFT ISSUED BY ONE BANKER AGAINST ANOTHER BANKER

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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:
1. Since £1 cost $4.76,
2. .. £50 cost 50 × $4.76 = $238.

2. What will be the cost of a sight draft for 200 marks?

SOLUTION:
1. Since 4 marks cost $0.945,
2. .. 1 mark costs 1 of $0.945 $0.23625,
3. and 200 marks cost 200 x $0.23625 $47.25.

3. Find the cost of a 60-day draft for 1044 francs.

SOLUTION:
1. Since 5.22 francs costs $1,

1
1 franc costs

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:
1. A 60-day draft for £100 10s.
2. A 90-day draft for 6276 francs.
3. A sight draft for 640 marks.
How large a draft can be bought on:
4. Liverpool, payable in 60 days, for $958?

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