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2. What is the interest on $1400 for 2 years, compounded semi-annually, at 6% ?

3. What is the amount of $400 for 1 yr. 6 mo., compounded quarterly, at 4% ?

4. What is the interest of $1500 for 3 years, compounded annually, at 5% ?

5. What is the interest of $850 for 3 yr. 2 mo. 15 da., compounded annually, at 6% ?

PARTIAL PAYMENTS. Partial Payments are payments in part, of a promissory note, bond, or similar obligation. When payments are made, the amount and date of each are written as receipts, on the back of the note.

A Promissory Note is a written promise to pay a certain sum of money at a specified time. It is sometimes called a note of hand, or simply a note.

ILLUSTRATION.—January 2, 1877, Henry Hand, of Reading, settles his account with William Morgan, of the same city. He finds that he owes the latter $500, which he is unable to pay immediately, and therefore gives Morgan his written promise to pay the amount due, with or without interest, and at such a time and place as may be agreed upon between them.

The promissory note in the above case might read as follows:

Reading, Jan. 2, 1877. $500.

Sixty days after date, I promise to pay to the order of William Morgan, five hundred dollars, with interest, without defalcation. Value received.

HENRY HAND.

The Date of a note is the time when it is drawn.
The Time of a note is the time for which it is drawn.

The Maker or Drawer of a note is the person who signs it.

The Payee is the person to whom the money is to be paid.

The Face of a note is the amount for which it is drawn.

The Date of the above note is Jan. 2, 1877, the Time is 60 days, the Maker or Drawer is Henry Hand, the Payee is William Morgan, and the Face of the note is $500.

An Indorser is a person who writes his name on the back of a note, and thereby makes himself responsible for its payment.

An Indorsement is anything written on the back of a note.

In order to make the payment of the above note more secure, Morgan requires that it shall be Indorsed by some responsible person. Jones consents to do this, and by writing his name on the back of the note becomes responsible for its payment.

When a note is made payable to bearer, or to the order of any person, it becomes negotiable; that is, it can be transferred or sold.

Note.—A bill or note, to be valid, is not confined to any set form of words. A promise to deliver or to be responsible for so much money is a good bill or note; but it must be exclusively and absolutely for the payment of money. In Pennsylvania, however, the law requires that the words "without defalcation” shall be inserted in a promissory note, and, for the protection of the payee, the note should contain the words “value received."

Promissory notes do not bear interest until after they are due, unless otherwise specified. If a note is paid before it is due, and afterwards comes into the hands of another holder, for value, the amount of the note can be collected from the maker at maturity. It is customary to write the amount of a note in figures, and also in words.

WRITTEN EXERCISES.

Chicago, March 8, 1875. $600.

Six months after date I promise to pay to the order of E. Simpson, six hundred dollars, with interest. Value received

JOHN MORTON.

This note was indorsed as follows: July 11, 1875, $50; November 21, 1875, $10; April 6, 1876, $120. What was the amount due at settlement, January 1, 1877? Face of note . . . . . . . . . . $600 Interest from March 8, 1875, to July 11, 1875

(4 mo. 3 da.) .........·_12.30 Amount due July 11, 1875 . . . . . . . 612.30 First payment (exceeding the interest) . . . ·_50.00 New principal . . . . . . . . . . . 562.30 Interest on $562.30 from July 11, 1875, to

November 21, 1875 (4 mo. 10 da.) ... 12.18 Second payment (less than interest) $10. Interest on $562.30 from November 21, 1875, to

April 6, 1876 (4 mo. 15 da.) . . . . . 12.65 Amount due April 6, 1876 . . . . . . . 587.13 Third payment $120+ second payment $10 (the

two payments exceeding the interest due) 130.00 New principal ........... 457.13 Interest from April 6, 1876, to January 1, 1877

(8 mo. 25 da.) . . . . . . . . . . 20.19 Amount due January 1, 1877 . . . . . . $477.32

ANALYSIS.—The interest on the face of the note from its date to the first payment we find to be $12.30, and, as the first payment exceeds the interest, we add this interest to the principal, and subtract the amount paid ($50), which gives us a new principal, $562.30. The interest on $562.30 from the first to the second payment is $12.18, which is greater than the second payment ($10); we therefore find the interest on $562.30 from the second to the third payment; this interest is $12.65, and, as the two payments now exceed the interest due, we subtract their sum ($130) from the amount of the last principal and the interest due, which gives us a new principal, $457.13. The interest on $457.13 from the third payment to January 1, 1877, is $20.19, which being added to $457.13 gives $477.32 as the amount due January 1, 1877.

The above method is the one which has been adopted by the Supreme Court of the United States, and is called the

UNITED STATES RULE. Find the interest on the given principal from the date of the note to the date of the first payment, and if this payment equals or exceeds the interest, subtract it from the amount then due, and proceed in like manner with the remainder as a new principal.

If any payment is less than the interest due, find the interest on the last principal to the date of the next payment, and so continue until the sum of the payments equals or exceeds the interest due; then subtract the sum of the payments from the amount due, and proceed as before.

The following arrangement of the example just given will be found to be convenient in all cases under the United States Rule.

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312

YR. MO. DA.
1875 3 8 TIME. PRINCIPAL INTEREST. AMOUNT. PAYMENT. BALANCE.
1875 7 11 4 mo. 3 da. $600 $12.30 $612.30 $50 $562.30
1875 11 21 4 “ 10 “ 562.30 12.18

101
1876 4 6 4 " 15 " 562.30 12.65 |
1877 1 118 “ 25 « 457.13 | 20.19 | 477.32 | None. | 477.32

Ž

587.13

120 % | 457.13

Boston, May 20, 1875. $650.

One year after date I promise to pay to Charles Miller, or order, six hundred dollars, with interest, at 6%. Value received.

HENRY HOWARD. Indorsements.-September 3, 1875, $35; December 18, 1875, $10; March 5, 1876, $200. What was due at settlenient, May 20, 1876?

3. A note of $1600, dated January 4, 1874, was indorsed as follows:- May 12, 1874, $56.75; October 19, 1874, $25; February 19, 1875, $450. What was due June 1, 1875, interest at 8%?

4. A note of $750, dated April 4, 1875, had the following indorsements: October 1, 1875, $15; June 4, 1876, $20; October 15, 1876, $300; February 20, 1877, $350. What was due August 1, 1877, at 6%?

5. A note of $400, dated May 12, 1875, and drawing interest at 6%, was indorsed as follows:-November 6, 1875, $10; July 9, 1876, $10; December 1, 1876, $175.50. What was due February 6, 1877?

In the settlement of notes and of interest-bearing accounts running a year or less, merchants often make use of the following

MERCANTILE RULE. Find the amount of the note or debt from the time it begins to draw interest, to the time of settlement ; also the amount of each payment, from its date to the time of settlement.

Add the amounts of the payments together, and subtract their sum from the amount of the note or debt.

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