8. When exchange on Chicago is 981, what is the cost of a draft for $362 for 30 d., interest at 6% ? Ans. $354.58. 9. What is the face of a sight draft that can be bought for $544.05, premium at %? Ans. $540. SUGGESTION. $544.05+1.00-$540. 10. What is the face of a draft payable 60 d. after sight that will cost $652.925, exchange 11% and interest at 6% ? SUGGESTION. Ans. $650. 652.925 1.015-.0105 650. 11. What is the face of a sight draft which costs $122.46, exchange being 21% discount? Ans. $125.60. 12. What is the face of a draft for 30 d. which costs $1560, interest at 6% per annum, exchange being 983? CASE II. Ans. $1588.595. FOREIGN EXCHANGE. 274. Foreign Exchange is that in which the exchange takes place between different countries. Foreign Exchange is computed in the same manner as inland exchange, except that the currency of one country must be reduced to that of the other. In Foreign Exchange three separate bills of the same tenor and date are made out and sent in a different manner, each of them containing a condition that it shall continue payable only while the others remain unpaid. The following table will be of service in changing from one currency to another: Country. TABLE. Denomination. .Franc....... ...Gold and silver.. .193 1. What must be paid for a draft on Paris for 1200 francs, premium of 7% ? SOLUTION. 1200 x $.193 $231.60 $231.60 × 1.07 = $247.812 Ans. $247.812. RULE. Reduce the face of the bill into the currency of the country in which the bill is purchased, and proceed as in Domestic Exchange. 2. What is the cost of a draft on Liverpool for 600 £, 1 £ equalling $4.8665, premium at 51% ? Ans. $3080.49. 3. What is the cost of a draft on London for 325 £, when exchange is quoted at $4.86 to the £? Ans. $1579.50. 4. What cost a draft in Paris on New York for $1200, when 1 franc = $.193, premium 4% ? Ans. 6466.32 francs. 5. How large a bill can be bought in Paris for $1500, when $15.18 francs? Ans. 7770 francs. 6. What is the cost of a bill on Berlin for 1600 marks, when a mark is $.238? 7. What is the cost of a draft in Berlin on Philadelphia for $523.60, when a mark is $.238? Ans. 2200 marks. Ans. $380.80. 8. Bought a bill on London for 400 £ when 1 £= $4.865, and a bill on St. Petersburg for 800 roubles when 1 rouble -.734: what was the cost of both in currency, gold being at a premium of 12% ? Ans. $2837.18. = CASE III. ARBITRATION OF EXCHANGE. 275. Arbitration of Exchange is an exchange between two places by means of one or more intermediate exchanges. WRITTEN PROBLEMS. 1. A merchant owes a bill in Paris to the amount of 15000 francs, and remits by indirect exchange on London: what is the cost of the draft, 1 £ being equal to $4.86, and in Paris 24.75 francs equal to a £. SOLUTION. 15000 × $4.86 24.75 = $2945.45. Let the pupil give the analysis. 2. A merchant living in Chicago owes a debt of 6000 marks in Berlin: what does it cost him by indirect exchange through Liverpool and Paris, the rates being as follows: in Chicago on Liverpool 1 £= $4.86, in Liverpool on Paris 1 £= 25.25 francs, and in Paris on Berlin 1 franc 1.08 marks? = Ans. $1067.33. 3. A merchant in Decatur, Illinois, owes a merchant in Reading, Pa., $3500; he sends a draft by Chicago and New York, exchange between Decatur and Chicago being 11% premium, between Chicago and New York at par, and between New York and Reading at 1% discount: what does he pay for the draft? Ans. $3534.74. SECTION XXI. EQUATION OF PAYMENTS. 276. Equation of Payments is the process of finding the average time of payment of several sums of money due at different times. 277. The Term of Credit is the time a debt has to run. 278. The Average Term of Credit is the average of the several terms of credit. 279. The Equated Time is the time at which the payment of the several debts may be made together without loss to either debtor or creditor. CASE I. When the Terms of Credit begin at the Same Time. ORAL EXERCISE. 1. If a man borrow $40 for 5 months, how long should he lend $50 to repay an equal amount of interest? SOLUTION.-The interest on $40 for 5 months is the same as the interest on $1 for 40 times 5 months, or 200 months, and the interest on $1 for 200 months is the same as the interest on $50 for of 200 months, or 4 months. Hence, the interest on $40 for 5 months is the same as the interest on $50 for 4 months. 2. If a man lend me $100 for 6 months, how long should I lend him $50 to reciprocate the favor? 3. If I owe a merchant $30 for 10 months, how long should he owe me a debt of $75 to balance the favor? 4. A lends B $600 for 5 months: how long should B lend A $150 to reciprocate the favor? WRITTEN PROBLEMS. 1. Sold a house and lot, payable as follows: $300 in 3 mo., $600 in 5 mo., $500 in a year and $1000 in 2 years: what was the average term of credit? Ans. 141 mo. SOLUTION. 66 300 x 3 mo. 1000 × 24" 2400 = = = 900 mo. 3000" 6000" 33900 mo. ANALYSIS.-A credit of $300 for 3 mo. is equivalent to a credit of $1 for 900 mo.; a credit of $600 for 5 mo. is equivalent to a credit of $1 for 3000 mo.; a credit of $500 for 12 mo. is equivalent to a credit of $1 for 6000 mo.; a credit of $1000 for 24 mo. is equivalent to a credit of $1 for 24000 mo. ; the sum of the credits therefore is equal to a credit of $1 for 33900 mo., or a credit of $2400 for as many months as 2400 is contained times in 33900, or 14 mo. 2. Bought some land on which I was to make the following payments: $50 cash, $150 in 10 mo., $200 in 22 mo., $200 in 2 yr. 10 mo. what is the average time of credit? Ans. 21 mo. 3. I owe $600, due in 5 mo.; $1000, due in 10 mo.; $1200, due in 71⁄2 mo.: what is the average term of credit? Ans. 8 mo. 4. Bought goods June 1st, to be paid as follows: $300 in 30 d., $600 in 60 d. and $900 in 90 d.: what is the equated time of payment? Ans. Aug. 10. 5. Sold to a merchant goods, Apr. 1, to be paid for as follows: $300 in 4 mo., $800 in 5 mo. and $1000 in 8 mo: what is the equated time of payment? Ans. Oct. 10. 6. Bought a farm for $10000, to be paid for as follows: 25% in 6 mo., 20% in 1 yr. 6 mo., and the remainder in 2 yr.: what is the average term of credit? Ans. 21 mo. 18 d. 7. Bought a bill of goods amounting to $10500, payable in I made the following payments: $2000 in 2 mo. and 6 mo. |