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Exchange between London and other places in this

Country. The several cities, towns, &c. in Great Britain, exchange with London for a small premium in favour of London, as from { to 1, or 1 per cent. The premium is more or less, according to the greater or less distance, and according to the demand for bills.

Ex. York draws on London for 5601. 10s., .exchange being per cent. ; how much money must be paid at York for the bill ?

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£. 564 14 0 To avoid paying the premium, which, in some cases, would not be just, it is the usual practice to take the bill payable a certain number of days after date. On this principle, interest being 5 per cent. 78

365 days are equivalent to il. per cent, because =73.

Ex. A friend at Exeter has received for me 68 guineas, in which he is no ways interested, and having no means of sending the money but by a bill of exchange, he agrees with his banker to draw it 30 days after date, rather than pay the premium of į per cent., is my friend, or the banker, the gainer, allowing 5 per cent. ?

EXAMPLES FOR PRACTICE. Ex. 1. How much currency will 6630 guilders, bank-money': be worth in Holland, agio being 84 per cent. ?

Ex. 2. What is the agio of 3310 guilders, at 6 per cent. ?*

Ex. 3. What is the agio of 5000 dollars, at 4 per cent., and how much bank money will the 5000 currency purchase ?

Ex. 4. A London merchant draws on Amsterdam for 15641. sterling ; how many pounds Flemish, and how many guilders will that amount to, exchange being 34 schil. 8 gro. per £. sterling.t See Tabie, p. 233.

NOTES.

* If the agio only be required, say, as 100 : agio per cent. : : so is the given sum to the agio required : here, as 100 : 6 : : 3310 : to the required sum.

+ The money in Holland is sometimes réckoned in guilders and stivers, as well as in schillings and grotes. To reduce Flemish pounds and schillings into guilders and stivers, multiply by 6; and if there be any pence multiply them by 8 for penings : or divids

Ex: 5. How much sterling money will pay a Portuguese bill of ex. change of 1654w1 372 millreas; that is, of 1654 millreas and 372 reas, exchange being 65ă pence sterling per millrea? *

Ex. 6. How many Portuguese reas will 7501, sterling amount to, exchange being 64 per millrea?

Ex. 7. A Spanish merchant imports from Seville goods to the value of 1081 piastres, 6 rials: how much sterling money will this amount to, exchange being, on the day of payment, 413 pence per piastre? See Table, p. 236-7?

Ex. 8. I want to purchase goods at Cadiz, and for this purpose pay into a Spanish house 1000l.: how much value, in piastres, may I expect, exchange being 35. 6 d. per piastre ?

ARBITRATION OF EXCHANGES.

The course of exchange, between nation and nation, nam turally rises or falls, as we have seen, according as the cireumstances and balance of trade may happen to vary. To draw upon, ai

to remit money to foreign places, in this Auctuating state of exchange, in the way that will turn out most profitable, is the desión of arbitration.

Arbitration of Exchange, then, is a method of finding such a rate of exchange between any two places, as shall

NOTES

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the Flemish pence by 40, and the quotient will be guilders; and half the remainder, if there be any, will be stivers : thus, to bring 3381.175. 48., or 81328 Flemish pence into guilders:

£. $. gri 338 17

4.0) 8132,8

guild, stiv. guild. stiv. 2033 82038 4 2033 O 2033 * In Portugal accounts are kept in reas, and millreas, the latter being equal to 1000 of the former; and they are distinguished from each other by some such mark as that in the question.

The millrea, in exchange with this country, is at par 671 sterling, or 55.714., and the course usually runs from 55. 3d. to 55. sd. TABLE - Par in sterling.

d. f.

0.27 s i crusade

make 1000 reas

I milirea The reas being the thousandth parts of the millreas, are annexed te die integer, and the work proceeds as in decimals.

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400 reas

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be in proportion with the rates assigned between each of them and a third place.

By comparing the par of exchange thus found, with the present course of exchange, a person is enabled to find which way to draw bills, or remit the same to most advantage.

[Questions in this rule are performed by the Rule of Three.]

Arbitration of exchange, is either simple or compound.

In simple arbitration, the rates of exchange from one place to two others are given, by which is found the core respondent price between the said two places, called the arbitrated price.

An example or two will make the subject clear.

Ex. 1. If exchange between London and Amsterdam be 34 schil. O grotes per £. sterling, and if exchange between London and Genoa be 45 pence per pezza (see Table, p: 236,) what is the par of arbitration between Amsterdam and Genoa: Here 1l. = 240 pence': therefore, as

240d. : 345. Ogr. :: 45d. : 78405r. Answer, 78 Flemish grotes, or pence per pezza Genoa. Ex. 2. If exchange from London to Amsterdam be 33s. 91. per £. and if exchange froin London to Paris be 32d. per crown, what inust be the rate of exchange from Anisterdam to Paris ?

Ex, 3. If exchange from Paris to London be 32. per crown, and if exchange from Paris to Amsterdam be 54d. Flemish per crown, what must be the rate of exchange between London and Amsterdam, in order to be on a par with the other two?

Ex. 4. A nasterdam exchanges on London, at 35 schil. 5 gro. per £. sterling; and the exchange between London and Lisbon is pence per milrea, what is the exchange between Amsterdam and Lisbon ?

The course of exchange being given, and the par of arbitration found, we obtain a metliod of drawing and remitting to advantage.

Ex. 5. If exchange from London to Paris be 32 pence sterling per crew, and to Amsterdam -105 Flemish per £., and if I learn that the course of exchange between Paris and Amsterdain is fallen to 52 penee Flemish per crown;

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what may be gained per cent., by drawing on Paris and remitting to Amsterdam ?

By Ex. 2, the par of arbitration between Paris and Amsterdam is 54d.. Flemish per crown: then di

£. 32

750 drawŋ ac Parise d. Fl.

d. Fl.

750 39000 credit at Amsterdam.
d. Fi. £. d. Fl. £. d.
405

39000 96 11 to be remitted ; therefore 1001, 061. 55. 11d. = 31. 145. 1d. = gain per cent.

If the course of exchange between Paris and Amsterdam be at 50 Flemish per crown, instead of 52 ; and if I would gain by the negotiation, I must draw on Amsterdam and remit to Paris : thus £. d. Fl. £. d. Fl. 405

100 40500 drawn at Amsterdam. d. Fi,

d. Fl. 56

40500 723 credit at Paris. d.

£. s.

723 96 therefore 1001. 961. 85. = 31. 125. gain per cent.

In these cases, credit at one foreign place pays the debt at the other.

We might carry the subject of Exchanges to almost any length; but we have said enough to render the theory and practice easy ; and from what the pupil has seen he will be able to apply the foregoing principles and rules to the practice of any merchant's counting-house in which he may be situated. We shall, however, give an example in Compound Arbitration.

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In Compound Arbitration, the rate of exchange between three or more places is given, to find how much a remittance passing through them all will amount to at the last place: or to find the arbitrated price, or par of arbitration, between the first and last place.

Examples of this kind may be worked by several successive statings in the Rule of Three, or according to the following Rules.

(1) Distinguish the given rutes, or prices, into antecedents and consequents, placing the antecedents in one

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column, and the consequents in another, with the sign of equality between them.

(2) The first antecedent, and the last consequent to which an antecedent is required, must be of the same kind.

(3) The second antecedent must be of the sume kind with the first consequent, and the third antecedent of the sume kind with the second consequent, &c.

(4) Multiply the antecedents together for a divisor, and the consequents together for a dividend, and 'the quotient will be the answer required

Ex. If a merchant in London remit 5001. sterling to Spain by way of Holland, at 35 shillings Flemish per pound sterling, thence to France at 58 pence per crown, thence to Venice at 10 crowns for 6 ducats, and thence to Spain at 360 mervadies per ducat; how many piastres of 272 mervadies will the 5001. amount to in Spain ? il.

35s, or 420d. Fl. 58d.

1 crown 10 Cr

6 ducats i duc.

360 mervadies 272 mer.

i piastre How many piastres = 500l.?

420 X 0 X 360 X 500 Omitting the units, we have by the rule,

58 X 10 X 272 and this fraction, reduced to its lowest terms, gives 21 X 3 X 45 X 500 1417500

= 28754 piastres, which is the 29 X 17

493
answer.
By the Rule of three we should have said,
11.
420d.
500l.

210000d.
58d.
1 cr.
210000d.

3620 cr.*
6 duc.
3620 cr.

2172 duc.
i duc. 360 mer.

781920 mer. 272 mer. : 1 pias. 781920 mer. 28751 piastres. If the course of direct exchange to Spain were 42, pence sterling, then the 500l. remitted would only amount to 2823) piastres, of course 28751 - 2823], gives 52, which is the number of piastres gained by the negotiation.

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2172 duc.

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NOTE

* The fractions are omitted, and on that account the answer by this method will not be quite accurate.

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