BANK DISCOUNT. 227. When the holder of a promissory note sells the note to a bank, or other purchaser, the sum paid by the bank is called the proceeds or avails of the note, and the difference between the sum named in the note and the proceeds is called the discount. 228. Discount is reckoned at so much per cent, and the per cent is called the rate of discount. 229. Questions in bank discount are calculated like questions in simple interest, the terms used being discount instead of interest, and rate of discount instead of rate of interest. NOTE. The sum named in the note should be written in words, and is called the face of the note. The person signing the note is called the maker; a person who writes his name on the back of the note is called an indorser, and is responsible for the payment of the note. A note, to be legal, must contain the words "value received”; to be negotiable, must be made payable to the bearer, or to the order of some person who must indorse the note. When a note bears interest, the discount is computed on the face of the note with the interest added. A note is nominally due at the expiration of the time named in the note, but it does not mature, that is, become legally due, until three days after this time. These three days are called days of grace. And the discount is computed on the time between the day the note is discounted and the day of its maturity. When the time is expressed in days, the day of maturity is found by counting forward from the date of the note the number of days named in the note, and the three days of grace. When the time is in months, the day of maturity is found by counting the number of calendar months, and the three days of grace. When a note falls due on Sunday, or a legal holiday, it is payable on the day previous. A protest is a notice in writing by a notary public to the indorsers that a note has not been paid. If a note be not protested on the last day of grace the indorsers are released from their obligation. 230. Find the day of maturity, the time to run (from the day the note is discounted), the discount, and the proceeds of the following notes: $610.25. BOSTON, June 12, 1885. Sixty days after date I promise to pay to the order of Edwin Ginn six hundred ten and 25 dollars, for value received. Discounted at 6%, July 1. SAMUEL HALE. Counting 60 dys. from June 12, we have 18 in June, 31 in July, and 11 in August. Therefore the note becomes due Aug. 11/14 (11 denotes the day it is nominally due, and 14 the day it is legally due). The time to run is 30 dys. in July and 14 in August, that is, 44 dys. The discount is the interest on $610.25 for 44 dys., at 6%. Therefore the discount is 73 × $0.61025 = $ 4.48. The proceeds = $610.25 — $4.48 = $605.77. Due Aug. 14; discount, $4.48; proceeds, $605.77. Ans. CHICAGO, Feb. 13, 1885. $1050. Six months from date we jointly and severally promise to pay to the order of George Hall ten hundred and fifty dollars, for value received, with interest at six per cent. Discounted at 8%, May 13. Interest on note for 6 mos. = - $31.50. JAMES BLAKE. HENRY SHAW. Amount of note when due is $1050 + $31.50 $1081.50. Day of maturity, Aug. 13/16 Time to run, 3 mos. 3 dys. Discount on $1081.50, at 8%, for 3 mos. 3 dys. = $22.35. Proceeds, $1081.50 - $22.35 $1059.15. = Due Aug. 16; discount, $22.35; proceeds, $1059.15. Ans. Ex. 147. Find the day of maturity, the time to run, the discount, and the proceeds, on the following notes: 1. $2250. CONCORD, N.H., Jan. 1, 1885. Four months from date I promise to pay to the order of George Marston twenty-two hundred and fifty dollars, for value received. Discounted at 7%, Jan. 12. 2. $432.55. SIMON STEVENS. NEW YORK, Jan. 3, 1885. Sixty days from date I promise to pay James Wilson, or order, four hundred thirty-two and 55 dollars, value received. Discounted at 61%, Jan. 6. 3. $670.35. JOHN ALLEN. ST. LOUIS, Jan. 6, 1885. Ninety days from date I promise to pay to the order of Peter Holmes six hundred seventy and dollars, value received. Discounted at 7%, Jan. 26. 4. $1304.90. ROBERT DAY. CINCINNATI, Jan. 25, 1885. Five months after date I promise to pay to the order of John Shannon thirteen hundred four and dollars, for value received, with interest at six per cent. Discounted at 41%, March 15. CHARLES HILLMAN. 5. $2260. BALTIMORE, MD., June 19, 1885. Sixty days from date I promise to pay to the order of John Morrison twenty-two hundred and sixty dollars, value received. Discounted at 51%, July 16. FRANK HOWE. 6. $645. AUSTIN, TEX., July 28, 1885. Thirty days from date I promise to pay to the order of John Moses six hundred and forty-five dollars, value received. Discounted at 6%, Aug. 3. 7. $1000. RICHARD SMITH. SAVANNAH, GA., Oct. 4, 1884. Six months after date I promise to pay to John Proctor, or order, one thousand dollars, value received, with interest at seven per cent. Discounted at 8%, Dec. 31. 8. $2912.60. JAMES WHITRIDGE. PHILADELPHIA, Feb. 19, 1885. Ninety days after date I promise to pay to the order of George Wright twenty-nine hundred twelve and 6 dollars, value received. Discounted at 6%, March 1. 9. $455.04. PETER BURKE. CHARLESTON, S.C., Sept. 2, 1885. Four months from date I promise to pay to the order of Edmund Horne four hundred fifty-five and dollars, value received. Discounted at 51%, Sept. 16. 10. $1140. PAUL WEST. NEW ORLEANS, LA., July 1, 1885. Ninety days after date I promise to pay to the order of William Whitridge eleven hundred and forty dollars, value received. Discounted at 71%, Aug. 15. 11. $10,089.25. JOHN CLEMENT. DENVER, COL., Oct. 14, 1885. Ninety days after date I promise to pay to the order of John Higgins ten thousand eighty-nine and 25 dollars, value received. Discounted at 10%, Dec. 1. 100 JOHN KELLEY. 231. To determine the face of a note that will yield a given sum when discounted. For how much must a four-months' note without interest be made that it may yield $1000 when discounted at a bank at 6% ? The discount on $1 for 4 mos. 3 dys. is $0.0205. Proceeds of $1 is $1-$0.0205 = = $0.9795 0.9795 of $1. Therefore the face required is $ 1000 ÷ 0.9795 – $1020.93. Ex. 148. 1. Find the face of a note for 30 dys. that will realize $600 when discounted at 6%. 2. Find the face of a note for 60 dys. that will realize $8000 when discounted at 8%. 3. Find the face of a four-months' note that will realize $800 when discounted at 5%. 4. Find the face of a note for 90 dys. that will realize $1700 when discounted at 7%. 5. Find the face of a two-months' note that will realize $900 when discounted at 7-3%. 6. Find the face of a three-months' note that will realize $2200 when discounted at 7%. PRESENT WORTH AND DISCOUNT. 232. The present worth of a sum of money due at the end of a fixed time is the sum that, put at interest for the fixed time, will amount to the given sum. Thus, $100 will in 2 yrs., at 6%, amount to $112. And $112 to be paid at the end of 2 yrs. is equal in value to $100 paid now. Hence $ 100 is regarded as the present worth of $112 to be paid in 2 yrs. |