equal to the simple interest at the legal rate for the time specified in the note. Hence the

RULE. I. Compute the interest on the face of the note for three days more than the specified time; the result will be the discount.

II. Subtract the discount from the face of the note, and the remainder will be the proceeds.

EXAMPLES FOR PRACTICE.

1. What is the discount, and what the proceeds, of a note for $450, at 60 days, discounted at a bank at 6 %?

Ans. Discount, $4.725; proceeds, $445.275. 2. What are the proceeds of a note for $368, at 90 days, discounted at the Bank of New York? Ans. $361.345 +. 3. What shall I receive on my note for $475.50, at 60 days, if discounted at the Crescent City Bank, New Orleans? Ans. $471.33+.

4. What are the proceeds of a note for $10000, at 90 days, discounted at the Philadelphia Bank?

Ans. $9845.

5. Paid, in cash, $240 for a lot of merchandise. Sold it the same day, receiving a note for $250 at 60 days, which I got discounted at the Hartford Bank. this speculation?

What did I make by
Ans. $7.37.

6. A note for $360.76, drawn at 90 days, is discounted at the Vermont Bank. Find the proceeds. Ans. $355.168+. 7. Wishing to borrow $530 of a western bank which is discounting paper at 8 per cent., I give my note for $536.75, payable in 60 days. How much do I need to make up the required amount? Ans. $.7645.

NOTES. 1. To indicate the maturity of a note or draft, a vertical line () is used, with the day at which the note is nominally due on the left, and the date of maturity on the right; thus, Jan. 10.

2. When a note is on interest, payable at a future specified time, the amount is the face of the note, or the sum made payable, and must be made the basis of discount.

Give rule.

Find the maturity, term of discount, and proceeds of the following notes:

$500.

BOSTON, Jan. 4, 1859.

8. Three months after date, I promise to pay to the order of John Brown & Co. five hundred dollars, at the Suffolk Bank, value received. JAMES BARKER.

9. Six months after date, I promise to pay Thomas Lee, or order, seven hundred fifty dollars, with interest, value received. BYRON QUINBY.

Discounted at a broker's, Nov. 15, at 10 %.

337. Given the proceeds of a note, to find the

face.

1. I wish to borrow $400 at a bank. For what sum must I draw my note, payable in 60 days, so that when discounted at 6 per cent. I shall receive the desired amount?

$400, by this sum; for, as many times as the proceeds of $1 is contained in the given proceeds, so many dollars must be the face of the required note. Hence the

Give Case II. Analysis.

RULE. Divide the proceeds by the proceeds of $1 for the time and rate mentioned, and the quotient will be the face of the note.

EXAMPLES FOR PRACTICE.

2. What is the face of a note at 60 days, which yields $680 when discounted at a New Haven bank?

Ans. $687.215+.

3. What is the face of a note at 90 days, of which the proceeds are $1000 when discounted at a Louisiana bank? Ans. $1013.085 +.

4. Wishing to borrow $500 at a bank, for what sum must my note be drawn, at 30 days, to obtain the required amount, discount being at 7 %? Ans. $503.22 +.

5. James Hopkins buys merchandise of me in New York, at cash price, to the amount of $1256. Not having money, he gives his note in payment, drawn at 6 months. must be the face of the note? Ans. $1302.341 +.

What

EXCHANGE.

338. Exchange is a method of remitting money from one place to another, or of making payments by written orders. 339. A Bill of Exchange is a written request or order upon one person to pay a certain sum to another person, or to his order, at a specified time.

340. A Sight Draft or Bill is one requiring payment to be made "at sight," which means, at the time of its presentation to the person ordered to pay. In other bills, the time specified is usually a certain number of days "after sight."

There are always three parties, and usually four, to a transaction in exchange:

341. The Drawer or Maker is the person who signs the order or bill.

Give the rule. Define exchange. A bill of exchange. A sight draft. The drawer.

342. The Drawee is the person to whom the order is addressed.

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

344. The Buyer or Remitter is the person who purchases the bill. He may be himself the payee, or the bill may be drawn in favor of any other person.

345. The Indorsement of a bill is the writing upon its back, by which the payee relinquishes his title, and transfers the payment to another. The payee may indorse in blank by writing his name only, which makes the bill payable to the bearer, and consequently transferable like a bank note; or he may accompany his signature by a special order to pay to another person, who in his turn may transfer the title in like manner. Indorsers become separately responsible for the amount of the bill, in case the drawee fails to make payment. A bill made payable to the bearer is transferable without indorsement.

346. The Acceptance of a bill is the promise which the drawee makes when the bill is presented to him to pay it at maturity; this obligation is usually acknowledged by writing the word "Accepted," with his signature, across the face of the bill.

NOTE. Three days of grace are usually allowed for the payment of a bill of exchange after the time specified has expired. But in New York State no grace is allowed on sight drafts.

From these definitions, the use of a bill of exchange in monetary transactions is readily perceived. If a man wishes to make a remittance to a creditor, agent, or any other person residing at a distance, instead of transporting specie, which is attended with expense and risk, or sending bank notes, which are liable to be uncurrent at a distance from the banks that issued them, he remits a bill of exchange, purchased at a bank or elsewhere, and made payable to the proper person in or The drawee. The payee. The buyer. An indorsement. acceptance. What of grace on bills of exchange?

An

near the place where he resides. Thus a man by paying Boston funds in Boston, may put New York funds into the hands of his New York agent.

347. The Course of Exchange is the variation of the cost of sight bills from their par value, as affected by the relative conditions of trade and commercial credit at the two places between which exchange is made. It may be either at a premium or discount, and is rated at a certain per cent. on the face of the bill. Bills payable a specified time after sight are subject to discount, like notes of hand, for the term of credit given. Hence their value in the money market is affected by both the course of exchange and the discount for time.

348. Foreign Exchange relates to remittances made between different countries.

349. Domestic or Inland Exchange relates to remittances made between different places in the same country, An inland bill of exchange is commonly called a Draft. In this work we shall treat only of Inland Exchange.

CASE I.

350. To find the cost of a draft.

$500.

SYRACUSE, May 7, 1859.

1. At sight, pay to James Clark, or order, five hundred dollars, value received, and charge the same to our account. To M. SMITH & Co.

What is the cost of the above draft, the rate of exchange

being 1 per cent. premium?

OPERATION.

$500 X 1.015 = $507.50, Ans.

ANALYSIS.

Since ex

change is at 1 per cent. premium, each dollar of

the draft will cost $1.015; and to find the whole cost of the draft,

How is exchange conducted? Explain course of exchange. Foreign exchange. Inland exchange. Define a draft. What is Case I? Give analysis.