DISCOUNT.

285. DISCOUNT is an allowance made for the payment of money before it is due.

THE FACE of a note is the amount named in the note.

THE PRESENT VALUE of a note, is such a sum as, being put at interest until the note becomes due, would increase to an amount equal to its face.

THE DISCOUNT, on a note, is the difference between the face of the note and its present value.

286. Knowing the face of a note, due at a future time, and the rate of interest, to find its present value.

1. I give Mr. Wilson my note for $106, payable in 1 year: what is the present value of the note, if the interest is 6 per cent.? What is the discount?

Rule.-Divide the face of the note by 1 dollar plus the interest of 1 dollar for the given time.

NOTE.-When payments are to be made at different times, find the present value of the sums separately, and their sum will be the present value of the note.

Examples.

1. What is the present value of a note of $615, due 1 year 4 months hence, at 7 per cent.?

2. What is the present value of $202.58, due in 1 year 7 months and 18 days, at 6 per cent.?

285. What is discount? What is the face of a note? What is present value? What is the discount on a note ?-286. Knowing the face of a note and rate, how do you find the present value?

3. How much should I deduct for the present payment of a note of $721, due in 7 months and 6 days, at 5 per cent.?

4. If a note for $5160 is payable Feb. 4th, 1864, what is its value Sept. 10th, 1863, interest being reckoned at 8 per cent.?

5. What sum of money will amount to $2500, in 2 years 7 months and 12 days, at 12 per cent.?

6. What is the present value and discount of $3000, payable in 1 year 2 months and 20 days, at 7 per cent.?

7. A held a note of $1400 against B, payable Aug. 1st, 1856; B paid it May 15th, 1856: what sum did he pay, the interest being 7 per cent.?

8. A flour merchant bought for cash 300 barrels of flour, for $10.50 per barrel; he sold it the same day for $12 a barrel, and took a note at 3 months: what was the cash value of the sale, and what his gain, if the interest is reckoned at 7 per cent.?

9. A man purchased a house and lot for $10000, on the following terms: 5000 in cash, 2500 in 3 months, and the balance in six months: what was the cash value of the property, interest being reckoned at 6 per cent.?

10. Which is the more advantageous, to buy sugar at 7 cents a pound, on 4 months, or at 8 cents a pound on 6 months, at 6 per cent. interest?

11. Bought land at $10 an acre: acre if I abate 10 per cent., and still the purchase money?

what must I ask per

make 20 per cent. on

12. A merchant owed three notes, viz., $1000, payable Aug. 1st, 1855; $500, payable Oct. 10th, 1855, and $900, payable Nov. 1st, 1855: what was the cash value of the three notes, July 1st, 1855, reckoning interest at 6 per cent.; and what was the difference between that value and their amounts at the times when they fell due, if interest were reckoned from July 1st.

BANKING.

287. A CORPORATION is a collection of persons authorized by law to do business together. The instrument which defines their rights and powers is called a Charter.

288. BANKS are Corporations for the purpose of receiving de posits, loaning money, and furnishing a paper circulation represented by specie.

BANK NOTES are the notes made by a bank to circulate as money, and should be payable in specie, on presentation at the bank.

A PROMISSORY NOTE is the note of an individual, and is a positive engagement, in writing, to pay a given sum, either on demand or at a specified time.

No. 1.

$25.50

FORMS OF NOTES.

Negotiable Note.

PROVIDENCE, May 1, 1856.

For value received, I promise to pay on demand, to Abel Bond, or order, twenty-five dollars and fifty cents.

No. 2.

REUBEN HOLMES.

Note Payable to Bearer.

$875.39

ST. LOUIS, May 1, 1855.

For value received, I promise to pay, six months after date, to John Johns, or bearer, eight hundred and seventy-five dol lars and thirty-nine cents.

PIERCE PENNY.

No. 8.

$659.27

Note by two Persons.

BUFFALO, June 2, 1850.

For value received, we jointly and severally promise to pay to Richard Ricks, or order, on demand, six hundred and fifty nine dollars and twenty-seven cents.

ENOS ALLAN.

JOHN ALLAN.

No. 4.

$20.25

Note Payable at a Bank.

CHICAGO, May 7, 1856.

Sixty days after date, I promise to pay John Anderson, or order, at the Bank of Commerce, in the city of New York, wenty dollars and twenty-five cents, for value received.

Remarks Relating to Notes.

JESSE STOKES.

1. The person who signs a note is called the drawer or maker of the note; thus, Reuben Holmes is the drawer of note No. 1.

2. The person who has the rightful possession of a note is called the holder of the note.

3. A note is said to be negotiable when it is made payable to A. B., or order, who is called the payee (see No. 1). Now, if Abel Bond, to whom this note is made payable, writes his name on the back of it, he is said to indorse the note, and he is called the indorser; and when the note becomes due, the holder must first demand payment of the maker, Reuben Holmes; and if he declines paying it, the holder may then require payment of Abel Bond, the indorser.

4. When a note is not paid at the time it becomes due, the indorser must be notified of the fact, and of the time it was due. This notice is generally given by an officer called a notary public, and is called a protest.

5. If the note is made payable to A. B., or bearer, then the drawer alone is responsible, and he must pay to any person who holds the

note.

6. The time at which a note is to be paid should always be named; but if no time is specified, the drawer must pay when required to do so, and the note will draw interest after the payment is demanded.

7. When a note, payable at a future day, becomes due, it will draw nterest, though no mention is made of interest.

8. In each of the States there is a rate of interest established by aw, which is called the legal interest; and when no rate is specified, he note will always draw legal interest. If a rate higher than legal nterest is named in the note, or agreed upon, the drawer, in most of the States, is not bound to pay the note.

287. What are corporations? What is a charter?-288. What are banks? What are bank-notes? What is a promissory note?

9. If two persons jointly and severally give their note (see No. 3), it may be collected of either of them.

10. The words, "For value received,” should be expressed in every note.

11. When a note is given, payable on a fixed day, and in a specific article, as in wheat or rye, payment must be offered at the specified time; and if it is not, the holder can demand the value in money.

12. DAYS OF GRACE are days allowed for the payment of a not after the expiration of the time named on its face. By mercantile usage, a note does not legally fall due until 3 days after the expiration of the time named on its face, unless the note specifies "without grace." For example, No. 2 would be due on the 4th of November, and the three additional days are called days of grace.

When the last day of grace happens to be a Sunday, or a holiday, such as New Year's day, or the 4th of July, the note must be paid the day before; that is, on the second day of grace.

13. There are two kinds of notes discounted at banks: 1st. Notes given by one individual to another for property actually sold; these are called business notes, or business paper. 2d. Notes made for the purpose of borrowing money, which are called accommodation notes, or accommodation paper. The first class of paper is much preferred by the banks, as more likely to be paid when it falls due, or, in mercantile phrase, "when it comes to maturity."

BANK DISCOUNT.

289. BANK DISCOUNT is the deduction made by a bank from the face of a note due at a future time.

Bank discount, by custom, is the interest of the face of the note, calculated from the time when it is discounted to the time when it falls due; in which time three days of grace are always included (see remark 12). The interest on notes dis counted at bank is always paid in advance.

THE PROCEEDS of a note is the difference between its face and the discount.

289. What is bank discount? How is interest calculated? When is it paid? What are the proceeds of a note?