PROBLEMS 1. What will be the cost in Boston of a bill on Liverpool for £325 38. 9 d., exchange being 4.8650? 2. An agent in Philadelphia, having $7500 due his employer in England, is directed to remit a bill on Liverpool. What is the face of the bill which he can purchase for this money, exchange being 4.87? 3. A sight draft on Manchester for £720 cost $3472. What was the course of exchange? 4. Find the cost of a draft of £540 8s. 6d. at 4.86. 5. How large a bill of exchange on Liverpool can be bought for $6000 at 4.85? 6. How many francs can be bought for $4000 at 5.17? At $4.87 a 7. How many marks can be bought for $2000 at .95 ? 8. I wish to send $750 to my son in Edinburgh. pound, how large an express order can I buy? 9. An exporter in Boston drew a bill of exchange on a Paris firm for $28,560. If the exchange in Paris on Boston is quoted at 5.161, how many francs will it take to pay the draft? 10. A commission merchant has drawn on him against an importation of gloves, a 60 days' sight draft for £350 7s. 3d. If exchange is at 4.86, what will it cost him to pay the draft when it is due? 11. What will be the cost of a bill on Paris for 56,245 francs, exchange being 5 francs and 14 centimes to the dollar? 12. Change $40,535 to English money; to French; to German. 13. Change £5345 13s. 8d to United States money. 14. How much will a draft for 8500 francs cost at 5.18+ 32% ? 15. A commission merchant sold a bill on Liverpool at $4.85 and charged 1% brokerage. What was the face of the bill if the proceeds were $3221.40? 16. Change $1250 into marks; into pesos. 17. Change 1,000,000 marks into United States money; into pounds sterling. CHAPTER XXXVIII EQUATION OF PAYMENTS AND ACCOUNTS 554. Terms of Credit. In the wholesale trade goods are usually sold on certain terms of credit. A bill for goods often specifies that it is due in 30 days, 60 days, 90 days, two months, etc. The time thus specified in which the bill must be paid is called the term of credit. If the term of credit is given in days, the exact number of days must be counted; and if the number of months is given, the exact number of calendar months must be taken regardless of the number of days they contain. 555. Discount on Cash Payments and Interest on Late Payments. If a bill is paid before it is due, this entitles the payer to a discount. If a bill is not paid when due, it will draw interest at the legal rate from the date it is due. Thus, if a bill for $1000, due July 1, is paid June 1, the payee will have the use of the money for an extra month and can afford to pay interest for this use. Hence a discount will usually be allowed. If, on the other hand, it is paid August 1, the bill will draw interest for one month. If $1000 is due June 1 and $1000 is due July 1 the whole debt may be discharged equitably by a payment of $2000 on June 16, that is, 15 days after the first date and 15 days before the second. If $2000 is due June 1 and $1000 July 1, the whole debt may be paid June 11, that is, 10 days after the first date and 20 days before the second. Note that the use of $2000 for 10 days is equivalent to the use of $1000 for 20 days. 556. Equation of Payments. -The finding of the date when several bills due at different times may all be paid, is called equation of payments. ORAL EXERCISES 1. A bill for $2000 is due Aug. 1st and a bill for $4000 is due Sept. 1st. What date may the two bills be paid equitably? 2. A bill for $10,000 is due Oct. 1st and another bill for $2000 is due October 24th. What date may these bills both be paid? 557. Due Date. The date on which the total payment may be made is called the equated date or the due date. 558. Focal Date. The general plan in solving a problem like that given below is to find how many days before a certain date, as Aug. 5, the one payment is to be made. We could equally well find how many days after May 28th it is to be made. The date thus selected is called the focal date or pivotal date. Example. Ward & Co. sell goods to John B. Ford as follows: April 15, 1916, $2800, terms 2 mo.; April 28, $3500, terms 1 mo.; May 5, $4500, terms 3 mo. Find the due date for the whole account. Solution. The exact number of days is used as the time from the due date of each bill to the focal date. The exact number of days, or months and days, are used to determine the due date of each bill according as the term of credit of the bill is given in days or in months. In all cases the year is regarded as 360 days. We arrange the work as follows: = But the interest on $10,800 for one day is $1.80. Hence average time before Aug. 5 is 64.05 ÷ 1.8 35.6 or 36 days, and the due date is June 30. Notice that the due date does not depend on the rate of interest used. Hence 6% is used, being the most convenient rate. WRITTEN EXERCISES In this manner find the due date of each of the following: 559. Equation of Accounts. An account frequently consists of debit items designating goods sold on specified terms of credit and of credit items designating payments made on account. The finding of the date when such an account may be balanced equitably by one payment is called equating the account. Example. Bought goods as follows: Aug. 15, 1916, $1260, 30 da.; Aug. 20, $2400, 60 da.; Sept. 1, $4300, 45 da.; Sept. 10, $6800, 90 da. Made payments as follows, Aug. 30, $2000; Sept. 5, $2500; Sept. 20, $2500. Find the due date. But $29.42 is interest on $7760 at 6% for 22.8 or 23 days. Hence the due date is Jan. 1, 1917. Since the interest on the payments is greater than the interest on the deferred payments, it follows that the due date is after the focal date. example the exact number of days is used to find the Compare the example on page 423. Notice that in this due date of each bill. WRITTEN EXERCISES In this manner find the due date in each of the following: |