5. $8000 for 8 yr, at 5%, interest compounded semiannually.

6. $2250 for 6 yr. at 4%, interest compounded semiannually.

7. $10,000 for 10 yr. at 2%, interest compounded semiannually.

EXCHANGE

The written order of one party to another, directing the payment of a specified sum of money, is called a draft. The parties to a draft are drawer, drawee, and payee.

A time draft payable after sight matures as a promissory note.

Bank drafts form one of the most important mediums of exchange. If a merchant owes money in New York, Chicago, or in any other place, he can always purchase a draft from his home bank, and by transmitting this through the mails settle his indebtedness.

Banks usually charge a small sum for making such drafts, ten cents for small amounts and fifteen cents per hundred dollars.

In case of a draft for a large amount of money, such as several thousand dollars, the charge for the draft is reckoned as a fraction of one per cent of the face of the draft.

This charge is largely affected by the amount of money in the part of the country to which the draft is to be sent, the demand for money at the place where the draft is made, the cost of shipping the actual money, and other conditions. Owing to the effect of such conditions it is sometimes possible to buy a draft for less than its face value. When exchange costs more than its face value, it is said to be at a premium; when it costs less than its face value, it is said to be at a discount. Exchange is at par when the cost of a draft is its face value. Exchange is always quoted as a rate per cent, or as so many dollars on a $1000. The exchange is always reckoned on the face value of the draft. Thus % premium, or $1.25 premium, means that the cost of a draft for $100 is $1001⁄2, and the cost of a draft for $1000 is $1001.25. The rate of

exchange is generally a fraction of 1%.

Other forms of exchange are Express Money Orders, Postal Money Orders, Bank Checks, Travelers' Checks.

EXERCISE 133

1. What is the cost of exchange on a sight draft for $400 at 1% premium?

2. What is the cost of exchange on a sight draft for $300 at % premium?

3. Find the cost of a draft on New York for $200 at 1% premium.

4. Find the cost of a demand draft for $500 at 1% premium.

5. Find the cost of a sight draft for $600 at 1% premium.

6. Find how much must be paid for a sight draft for $1000 at $1.25 premium.

7. Find how much must be paid for a sight draft for $2000 at $2.50 premium.

8. Find the cost of remitting $800 from Dallas to Chicago by means of a bank draft when exchange is % premium.

9. Find the cost of a sight draft on Chicago for $700, exchange being at 1% discount.

10. Find the cost of a sight draft on New York for $400 when exchange is % discount.

11. Find the cost of exchange on a draft for $1000, exchange being % premium.

12. Find the cost of an express order for $1200 at the rate of 30¢ per $100.

13. If you had to remit $200 to Chicago when exchange is % premium, would you prefer to buy exchange, or to buy an express money order at the rate of 30 for $100?

14. What is the cost of an express money order for $1000, at 30 for $100?

15. What is the cost of a sight draft for $3000 at $1.50 premium?

16. What is the cost of a sight draft for $3000 at $2.50 premium?

Example. What is the cost of a draft on Buffalo for $800, payable in 30 da. at 6% interest, exchange being at the rate of 1% premium?

SOLUTION.

The interest on $800 for 30 da. at 6% = $4.00.

Cost of exchange = 1% of $800 = $2.00.

The cost of the draft = $800 + $2 − $4 = $798.

17. Find the cost of an express money order for $1400 at 30 for $100.

18. Find the cost of a draft for $10,000 at 1% discount.

19. Find the cost of a draft for $600 payable in 30 da. without grace, the rate of interest being 6%, exchange being 1% premium.

20. Find the cost of a draft, for $1000 payable in 30 da., exchange being at par and the rate of interest being 8%.

21. Find the cost of a 45 da. draft for $900, exchange being at % discount, and the rate of interest being 6%.