INTEREST AND BANKING NOTES Promissory Notes. When money is borrowed, the evidence of indebtedness is usually a written acknowledgment of the indebtedness and a promise to pay a certain sum of money at a certain time and place. Such a paper is called a promissory note, or simply a note. Maker and Payee. The person who signs the note (agrees to pay) is the maker of the note; the person to whom it is to be paid is the payee. Face and Amount. The sum loaned is called the face of the note, and the face plus the interest, the amount. STATE OF MICHICAR. $50.100 Three months Ypsilanti, Mich February, 1905 after date without grace I promise to pay to the order of Lists Mitional! Bunk, greitt Mich), Fifty Dollars. al the First National Bank Ypsilanti, Much: Value received with Due PQ John Doe Who is the maker of the note above? The payee? What is its amount? Time? Rate of interest? Write notes to cover the following conditions, all to be dated the INTEREST-NOTES 75 Maturity. A note is said to mature on the day when it is legally due. When the time is specified in days, exact days are counted in finding maturity; when in months, calendar months are counted. Generally, if a note matures on a holiday or on Sunday, it is payable the day following. Days of Grace. Many states still allow three days of grace for the payment of notes. Thus, a 30-day note would be legally due in 33 days from date. When the law allows but does not compel their use, many notes are drawn to read "without grace." Negotiable Notes. If the payee's name only is written in the note it can not be sold; but if it reads "pay to the order of 66 or to bearer," it can be sold. Notes which may be sold are called negotiable. Indorsement. When a note is transferred, the payee named must first write his signature across the back. This is called indorsing the note. Every indorser of a note is responsible for its payment, unless he writes the words. "without recourse "before his name. The responsibility of the indorser ceases upon the maturity of the note unless promptly notified of its non-payment, but the maker of the note is responsible for its payment until paid. If the payee simply writes his name across the back, he is said to indorse it in blank. This makes it payable to the bearer. But if he designates to whom the note is to be paid he is said to indorse it in full. Oral. 1. What is the face of the note shown on page 74? 2. When does the note mature without grace? With grace? Are days of grace allowed in your state? Written. 3. Write an indorsement in full for a note to your order. 4. Write an indorsement for a note to your order so as not to become responsible for the payment of the note. 76 INTEREST-NOTES 1. What is a usual rate of interest in your vicinity? Written. Use this rate to find the amounts of the following notes, treating 1 mo. as 11⁄2 of a year and 1 day as 3 of a month: 2. Face $175, date Jan. 10, time 1 yr. 6 mo. 3. Face $360, date Apr. 15, time 2 yr. 3 mo. 15 da. 4. Face $680, date Feb. 10, time 1 yr. 6 mo. 21 da. 5. Mr. Brown bought a house for $1,500. He paid $700 in cash and gave his note for the rest with interest at 5%, payable semiannually; what was the amount of interest due at each payment? 6. Mr. Lee bought a threshing machine for $300. He paid $150 in cash and gave his note for the rest with interest at 6%, payable annually; what was the amount of interest due at each payment? 7. A dealer sold an automobile for $1,000, receiving $400 cash and a note for the rest due in 3 years with interest at 6%, payable semiannually; how much interest was paid on the note altogether? 8. A farmer borrowed $600 on two notes of equal amounts, one due in two years and the other in 4 years with interest at 5%, payable annually; how much was due at the end of the four years? 9. Mr. Perkins bought a house and lot for $6,000. He paid $900 cash and gave three notes of equal amounts for the balance, due respectively in 4, 8, and 12 months with interest at 41%? what sum was due at each payment? 10. Mr. Williams purchased an apartment building for $12,000. He paid $4,000 cash and gave five notes of equal amounts for the rest, payable respectively 6, 12, 18, 24, and 30 mo. after date, with interest at 5%, payable semiannually; what was each semiannual payment? INTEREST-PARTIAL PAYMENT NOTES куку Privilege of Prepayment. Notes often contain a provision permitting the borrower to prepay a part of the principal before the note matures. Such advance payments are usually made on the days on which interest is due, or "interest days." Oral. I. A note for $500 dated Jan. 2, 1905, due in 5 yr. with interest at 6% payable annually provides the privilege of prepayment in multiples of $50 on interest days. When is the first interest due? How much is it? If the maker pays $100 of the face besides the interest, how much does he still owe? 2. What is the interest Jan. 2, 1907? If $100 of the face is paid on this date, how much does the maker still owe? 3. If the maker pays $100 on the principal on each interest day, what is the last payment? 4. If the payee of the above note pays only the interest on interest dates, what amount is due at the date of maturity of the note? 5. A promissory note for $2,500 due in 4 yr. with interest at 4% payable annually includes the privilege of prepayment in multiples of $500 on interest days. If the payee prepays $500 each interest day, what is the last payment? Written. 6. On July 1, 1904, John Doe signed a note for $400 due in 3 yr., interest 5%, payable semiannually with the privilege of prepayment in multiples of $50 on interest days. He paid $150 and interest on the obligation at each opportunity. What was the interest Jan. 1, 1905? What was the amount still due? 7. Find the amount still due after each further payment in Exercise 6 until the obligation was settled. 78 INTEREST-PARTIAL PAYMENT NOTES Indorsement of Payments. In partial payment notes it is customary to indorse the payments on the back of the note, when made. Written. I. A note for $500, dated Jan. 2, 1905, with interest at 6%, payable annually for 3 yr. with a privilege of prepaying in multiples of $100 on interest days, had the following indorsements: Received, Jan. 2, 1906, $130. John Doe. Each indorsement includes the interest paid on that date; how much was due Jan. 2, 1908? 2. Upon a note for $350 dated July 1, 1903, with interest at 5%, payable semiannually, the following payments, including interest, were indorsed: In the following notes the interest is payable annually, and prepayment of any sum is permitted on interest dates. amount due at the date of settlement: Find the April 1, April 1, 1903, $120 April 1, 1905 1902 |