WRITTEN EXERCISES.

2. When the Penn. Railroad pays 2% quarterly, what yearly dividend will be equal to this? Ans. 83%.

3. If I buy Michigan 6's at 108, interest payable semiannually, what annual rate % do I receive? Ans. 5211%. 4. If I buy 15 shares United Companies of New Jersey at 137 ($100), and receive $37 dividend quarterly, what annual rate of interest do I receive?

Ans. 7388%.

SUPPLEMENTARY PROBLEMS.

To be omitted unless otherwise directed.

5. Mr. Westlake sold $4000 Illinois 6's at 106, interest payable quarterly, and bought Kentucky 6's at 105, interest payable semiannually; did he increase or diminish his yearly income if each dividend was put out at interest as soon as recelved?

Ans. Diminished $1.80; surplus, $20.

6. I buy in August 20 shares Second and Third Sts. Pass. Railway ($50) at 83, and receive in October, January, April and July, a 3% dividend; what % income do I receive during the year, and what will be my entire dividend if each dividend is invested for the remainder of the year, at 8% interest?

Ans. Div. $123.60; rate, 78%.

COMPOUND INTEREST.

510. Compound Interest is interest on both principal and interest, when the interest is not paid when due.

Compound interest assumes that if the borrower does not pay the interest when due, it is proper that he should pay interest for it until paid. Some regard it as just, but it has not the sanction of law.

1. What is the compound interest of $400 for 2 yr. at 6%?

SOLUTION.-Multiplying by the rate per cent., we find the interest for 1 year to be $24; adding this to the principal, we find the amount to be $424, which is the principal for the 2d year. Multiplying the new principal by the rate, we find the interest for the 2d year to be $25.44, and adding this to the 2d principal, we find the amount for 2 years to be $449.44, from which subtract the 1st principal, and the remainder, $49.44, is the compound interest. Hence the following

Rule.-I. Find the amount of the principal for the firs period of time for which interest is reckoned, and make this the principal for the second period.

II. Find the amount of this principal for the next period; and thus continue till the end of the given time.

III. Subtract the given principal from the last amount, and the result will be the compound interest.

NOTES.-1. When the interest is due semi-annually or quarterly we and the interest for such time and proceed as above directed.

2. When the time is for years, months, and days, find the amount for the years, then compute the interest on this for the months and days, and add to the last amount before subtracting.

WRITTEN EXERCISES.

2. What is the compound interest of $568, for 3 yr., at 6 per cent.?

Ans. $108.50. 3. What is the amount, at compound interest, of $90, for 6 yr., at 7 per cent.? Ans. $135.06. 4. What is the compound interest of $347.50, for 4 yr. 8 mo., at 6 per cent.?

Ans. $108.76.

5. What is the compound interest of $17281, for 2 yr. 6 mo., at 6 %, payable semi-annually?

Ans. $275.27.

6. What is the amount of $240, for 2 yr. 3 mo., at 8 per cent., payable quarterly?

Ans. $286.82. 7. What is the amount of $450, for 8 yr., at 6 per cent., compound interest?

SOLUTION. We look in the table under 6 per cent., and opposite 8 yr. we find the amount of $1 to be $1.5938481; multiplying this amount by 450, we have the amount of $450, which is $717.23.

OPERATION.

$1.5938481 450

$717.2302950

8. What is the amount of $780, for 9 yr., at 8 per cent., compound interest?

Ans. $1559.22. 9. What is the amount of $300, for 16 yr., at 7 per cent., compound interest? Ans. $885.65. 10. Required the compound interest of $950, for 20 yr., at 4 per cent. Ans. $1131.57. simple and com

11. What is the difference between the pound interest of $600 for 6 yr. 6 mo. 6 da.

at 6%?

Ans. $42.90,

511. The calculation of compound interest is facilitated by the use of the following table. Similar tables are also used for simple interest.

TABLE.

Amonnt of $1 at Compound Interest in any number of years not exceeding 25.

EXCHANGE.

512. Exchange is the method of making payments in distant places by means of Drafts or Bills of Exchange.

513. Exchange is of two kinds, Domestic and Foreign. Exchange between two places in the same country is called Domestic or Inland Exchange; that between different coun tries is called Foreign Exchange.

514. A Draft or Bill of Exchange is a written order for the payment of money. In domestic exchange a bill is usually called a Draft.

515. A Sight Bill is one payable "at sight" or on its presentation. A Time Bill is one payable at a specified

time after sight or after date.

516. The Indorsement of a bill is the writing upon the back of it, by which the payee transfers the payment to another.

A special indorsement is an order to pay the bill to some particular person, who is then called the Indorsee, and he alone can collect the bill. An indorsement in blank is the writing of the holder's name upon the back, which makes the bill payable to the bearer.

The person who signs the bill is called the Maker or Drawer; the person requested to pay is called the Drawee; the person to whom the money is to be paid, is the Payee; the person who has possession of the bill is called the Owner or Holder.

517. The Acceptance of a bill is the promise of the Drawee, when presented, to pay it at maturity. The Drawee accepts by writing across the face of the bill, "Accepted," with the date and his signature; the bill is then called an Acceptance, and is of the character of a promissory note.

If a bill is protested for non-acceptance, the maker is under obligations to pay it immediately, although the time specified in it has not expired. Bills of exchange are entitled to "days of grace," unless a particular day is named. In New York, Pennsylvania, and a few other States, no grace

allowed to bills of sight. If a note is payable on demand, it is legally due when presented, as bank-notes, etc. If a particular time is specified in a note, it is legally due on that day. If a draft is drawn at usance, the time is regulated by custom or the law of the place where it is payable. When a bill is drawn "acceptance waived," it is not subject to protest until maturity. When an indorser writes over his name, "demand and aotice waived," he is liable even if the bill is not protested. If the inforser writes "without recourse" over his indorsement, he is not liable for the payment of the bill

In reckoning the time of maturity of a bill payable after date, the day on which it is dated is not included, and in the case of a bill payable after sight, the day of presentment is not included.

518. The Rate of Exchange is the rate per cent. which is reckoned upon a draft. The Course of Exchange is the current price paid in one place for bills of exchange upon another.

The brokerage is usually included in the quotation of exchange.

519. The Par of Exchange is the established value of the monetary unit of one country in the monetary unit of another; it is either intrinsic or commercial.

520. Exchange is at par when a draft or bill sells for its face; at a premium when it sells for more than its face; and at a discount when it sells for less than its face.

The rate of exchange between two places or countries depends upon the course of trade. If the trade between New York and Chicago is equal, exchange is at par. If New York owes Chicago, the demand in New York for drafts on Chicago is greater than the demand in Chicago for drafts on New York, hence the drafts are at a premium in New York. But if Chicago owes New York, the demand for drafts is less in New York than in Chicago; hence drafts in New York on Chicago are at a discount.

The reason why the banks in New York should charge a premium, is that they must be at the expense of actually sending money to the Chicago banks, or be charged with interest on their unpaid balance; the reason why the Chicago banks will sell at a discount is that they are willing to sell for less than the face of a draft in order to get the money owed them in New York immediately.

A check, draft, or certificate of deposit on a bank in the place where drafts are selling at a premium, is often sent to pay a debt in the place where drafts are selling at a discount, and such a check or draft will command a premium.

If the course of exchange is unfavorable in drawing, the discount is sometimes avoided by means of a circuitous exchange through several intermediate places between which the course is favorable.

DOMESTIC EXCHANGE.

521. Domestic or Inland Exchange is the exchange between two places in the same country.

522. The Base of an inland bill is the face; the Rate is the rate of premium or discount.

523. The Forms and Use of drafts may be seen by the following examples and explanations: