2. Find the cost of a draft of $8400 on Chicago, at 1% discount.

3. B paid $1602 for a draft on New York at 1% premium. Find the face of the draft.

8. Find the cost of a 60-day draft of $1000 on Chicago, if interest is 6%, and the premium on Chicago is 1%.

9. What is the cost of a 30-day draft of $1100, premium

5%, 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 11% 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%

3. Discount on each $1 of the draft

2. Cost at par of each $1 of the draft

=

$1-$0.0105

=

$0.9895.

4. Cost of each $1 of the draft

=

5. $1500 $0.9795 1531.39+... $1531.39+

-

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 11% discount, and interest at 6%?

16. A commission merchant sold $7500 worth of cotton. After deducting his commission of 14%, he remits the proceeds in a draft purchased at 1% 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. drawn up in triplicate formed a set present, many banks issue only single draft is followed by a letter of advice.

SET OF EXCHANGE

Formerly a draft of exchange. At drafts, but each

£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

To J. B. DON & CO.,

London, England.

RICHARD ROE.

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 BROTHERS&CO

This thin april 12th 1905 Thirty days after date of this FIRST

of Exchange Ascend unpund pny to the inter of John Doe, One Hundred and Sevente Seven Pounds 5/4 Sterling

rulu veraved which place to account of

(Signed)
Brown

Brothers tho

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:

380. Foreign exchange is generally quoted in the news

papers as follows, the prices varying:

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?

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

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?