$8000. FIRST NATIONAL BANK OF NEW ORLEANS, At sight, pay to the order of John Smith, Eight Thousand PHILADELPHIa, Pa. Cashier. EXPLANATION. Suppose John Smith, of New Orleans, owes James Thomson & Co., of Philadelphia, $8000; he goes into a bank in New Orleans and gets the above draft. He then writes on the back of the note, "Pay to the order of James Thomson & Co.," signing his name, and forwards it to James Thomson & Co., in Philadelphia, who take it to the Merchants' National Bank, and writing the name of their firia on the back, receive the money. $5600. THIRD NATIONAL BANK, ST. LOUIS, MO., Jan. 11, 1877. At ten days sight, pay to the order of H. B. Claflin & Co., Five Thousand Six Hundred Dollars, and charge the same to the account of JAMES SIMPSON, To the FIFTH NATIONAL BANK, NEW YORK. Cashier. EXPLANATION.-Suppose that Harvey Williams, of St. Louis, wishing to pay a debt of $5600 to H. B. Claflin & Co., of New York, buys the above draft on the Fifth National Bank of New York. He forwards it to H. B. Claflin & Co., who, having indorsed it, will present it at the bank. The "ten days after sight" means after acceptance. It should be presented to the bank upon which it is drawn as soon as received, when the cashier writes upon it "accepted," with the date of acceptance, and signs his name as cashier. This makes the bank liable for its payment, and is an agreement to pay it after ten days. A per NOTE. If Harvey Williams has an account with the Fifth National Bank, he may draw on it directly as one bank draws on another. son sometimes draws on a party who owes him in order to collect the bill. CASE I. 524. To find the cost of a bill of exchange at sight, or on time. 1. What must I pay in Philadelphia for a draft of $300 on New Orleans, exchange being 1 per cent. premium? Rule. Find the cost of $1 by adding the rate to $1, wher at a premium, or subtracting it, when at a discount; and multiply the result by the face of the draft. 2. What must be paid in New York for a draft of $2000 on St. Louis at 30 days, exchange being 2% premium? SOLUTION.-The draft being on time should be purchased at a discount. The discount of $1, at the rate in St. Louis, for 30+3 or 33 days, is $.0055, which subtracted from $1, equals $.9945, the cost of $1 of the draft if the exchange was at par, but there is a premium of 2 per cent., hence adding $.02 we find the actual cost of $1 of the draft to be $1.0145, and multiplying this by 2000, we have $2029, the entire cost. Hence, for time exchange, the following Rule. From $1 subtract the bank discount of $1 for the time and rate, where the draft is purchased; to this result add the rate of exchange when at a premium, and subtract it when at a discount, and multiply the result by the face of the draft. WRITTEN EXERCISES. 3. Manson & Co., of Harrisburg, owe a party in Cleveland $4750; what must they pay at a Harrisburg bank for a draft on Cleveland, exchange 3% discount? Ans. $4714.375. 4. What will a draft of $3500 cost, payable 30 days after sight, at 6%, exchange 1% premium? Ans. $3533.25. 5. A New York firm received a shipment of flour from Milwaukee, amounting to $7500, and remitted the money by a 15 day draft, at 7%, exchange being at a discount of 1%; what did they pay for the draft? Ans. $7361.25. SUPPLEMENTARY PROBLEMS. To be omitted unless otherwise directed. 6. A Detroit merchant bought an assortment of spring goods in New York at a cost of $1500; what will be the cost of a 2 mo. draft on New York, at 14% premium, which will discharge the debt? Ans. $1500. 7. A Philadelphia firm send their check for $4500 to their agent in Des Moines, where drafts on Philadelphia are selling at 11% premium; what will the Des Moines bankers pay for it? Ans. $4556.25. CASE II. 525. Given, the cost of a bill of exchange, to finā its face. 1. A Boston merchant paid $2029 for a draft on Pittsburgh at 30 days, exchange 2% premium; required the face Rule. Find the cost of a draft of $1, and divide the given cost by it; the quotient will be the face of the draft. WRITTEN EXERCISES. 2. Jones & Bro., of St. Paul, purchased a sight draft for $2587 on Cincinnati, at a discount of %; required the face of the draft. Ans. $2600. 3. A merchant in Maine buys a draft on New York at 45 days for $601.95 at a premium of 1%; what is the face of the draft? Ans. $600. 4. I received from Philadelphia a check for $40.20, which cost % to have cashed; what should have been the face of the check that I might have realized $40.20? Ans. $40.50. 5. My agent sold $5000 worth of goods on commission, at 23%, and remits the proceeds in a draft bought at 14% premium; what did I receive for the sale? Ans. $4814.81. SUPPLEMENTARY PROBLEMS. To be omitted unless otherwise directed. 6. A Baltimore merchant wishes to pay a debt of $1500 in Detroit by a sight draft on the First National Bank, Baltimore; if exchange on Baltimore is % premium at Detroit, what must be the face of the draft? NOTE. Since the draft is at a premium of per cent. in Detroit, it must be drawn for such a sum as, with the premium, will amount to $1500; hence the face will equal $15001.001 or $1498.13 7. If the Baltimore merchant in the previous problem buy, instead of a sight draft, a 90 day draft, what will it cost? Ans. $1474.91. 8. A Boston merchant sends to a creditor in Savannah a sight draft on Boston for $1498.13; what was the debt, exchange on Boston being at a premium of 1% ? Ans. $1500. CASE III. 526. Given, the face and the cost of a draft, to find the rate of exchange. 1. A draft on Baltimore for $2000 at 30 days cost me $2029; what was the rate of exchange? SOLUTION.-We find that the cost of $1 of the draft, if exchange was at par, is $.9945, and of $2000 is 2000 times $.9945, or $1989; the difference between $1989 and $2029, the actual cost, is $40, which is the premium; dividing the premium, $40, by the face, $2000, we have the rate, 2%. OPERATION. $1.0000 discount for 33 da. cost of $1 at par. $1989 .0055 $40 .02, or 2% Rule. Find the premium or the discount, and divide i by the face, to find the rate. WRITTEN EXERCISES. 2. A Savannah cotton broker bought a 30 day draft on Philadelphia for $3530.04, the face being $3500; what was the rate of exchange? Ans. 1% premium. 3. Sold grain on commission to the amount of $5000; having reserved 24%, I bought with the proceeds a draft for $4814.81, which I remitted to the consignor; what rate of exchange did I pay? Ans. 14% premium. 4. Mr. Bair, of Cincinnati, buys of Hood & Co., Phila., a lot of woollen goods amounting to $750, and forwards in payment a draft at 3 mo., which costs him $727.12; what was the rate of exchange? Ans. 1% discount. FOREIGN EXCHANGE. 527. Foreign Exchange is the exchange that takes place between different countries. A Set of Exchange consists of three bills of the same tenor and date, each containing a condition that it shall continue payable only while the others are unpaid. To prevent loss, or delay, each bill of a set is remitted in a different manner, and when one bill of the set has been paid the others are worthless. 528. The Money of Account of any country consists of the denominations of the money of that country in which accounts are kept. 529. The Act of March 3, 1873, provides that "the value of the standard coins . . . of the world shall be estimated annually by the Director of the Mint, and be proclaimed on the first day of January by the Secretary of the Treasury." 530. In accordance with this law, the following table was published by the Secretary of the Treasury, Jan. 1, 1888: 531. Bills of Exchange are usually made payable either 3 days after sight or 60 days after sight. The latter are quoted at a lower rate, on account of the discount. |
