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Little Rock, Feb. 1, 1886. Six months after date, for value received, I promise to pay Horatio Alger, Jr., or order, one thousand dollars, with interest at 6%.
Charles A. Fosdick. Discounted Feb. 1, 1886, at 6%: find the proceeds.
10. What is the difference between the true discount and the bank discount on $500, due in 1 year 8 months, money worth 6%, and not reckoning days of grace ?
11. Illustrate Art. 357 by an original problem.
ART. 359.—To find the face of a note, the proceeds,
time and rate being given.
12. Mr. Worthington wishes to borrow $800 from a bank for 90 days : for what sum must he give his note, the rate of discount being 6% ?
Process. The bank discount of $1 for 93 days at 6% is $.0155 and the proceeds $.9845. To give $800 proceeds for the same time and at the same rate, will require as many times $1 as $.9845 is contained times in $800, or $812,60.
ART. 360.-Rule for finding the Face of a Note when the proceeds, time and rate are given.--Divide the proceeds by the proceeds of one dollar for the given time and at the given rate : the quotient is the face of the note.
13. For what sum must a note be drawn at 60 days to net $1,500 when discounted at 5%?
14. If money is worth 5%, for what sum must a note be drawn for 90 days to yield $1,776.75 ?
15. What must be the face of a note due in 4 months, discounted at 6%, that the proceeds may be $600 ?
16. What must be the face of a note due in 3 months, discounted at 5%, that the proceeds may be $1,200 ?
17. Illustrate Art. 359 by an original problem.
ART. 361.—To find the time, the face, rate and pro
ceeds being given.
Mr. Dobbins's note of $1,000 discounted at 6% yields $989.64: what is the time?
Process. If the face is $1,000 and the proceeds $989.64, the discount is $1,000 $989.64 $10.36. The discount on $1,000 at 6% for 1 day (reckoning 365 days to the year), is $or $13, and to produce $10.36 it will require as many days as $4} is contained times in $10.36, or 63 days. 63 days 3 days grace = 60 days. NOTE.—The pupil should frame the rule.
19. The proceeds of a note for $500, discounted at 6%, being $494.75, what is the time?
20. The proceeds of a note for $3,000, discounted at a bank at 6%, being $2,953.50, find the time.
21. A note dated January 1, 1886, was discounted April 1, at 7%; the face was $3,500 and the proceeds $3,437.57 : what was the time ?
22. A note bearing interest at 6%, dated October 1, 1885, at 60 days, was discounted at 6%; the face was $950 and the proceeds $952.87: on what day was it discounted ?
23. Illustrate Art. 361 by an original problem.
ART. 362.—To find the rate, when the face, time
and proceeds are given.
24. Mr. Waters gave his note for $350 at 60 days; the proceeds at a bank being $347.55, what was the rate ?
Process. The discount of $350 at 1 per cent. for the given time is $.6125, and to produce $2.45 will require a rate equal to the number of times $.6125 is contained in $2.45, or 4. Therefore, the rate is 4%.
NOTE.—The pupil should frame a rule.
25. The proceeds of a note for $400, at 30 days, being $397.80, what is the rate ?
26. A merchant bought goods to the amount of $3,413.77, and gave in payment his note for 60 days, discounted at a bank: if the face of the note was $3,450, what was the rate ?
27. A note dated July 1, 1886, at three months, was discounted at a bank on July 31, 1886; the face was $2,400 and the proceeds $2,369.66 : what was the rate ?
28. A note of $1,800, dated November 19, 1885, at 4 months, was discounted December 19, the proceeds being $1,767.45 : what was the rate ?
29. A note of $7,700 discounted at 50 days gave $7,631.98 proceeds : what was the rate ?
30. $800 discounted for 63 days, including three days of grace, yielded $793 : what was the rate ?
Review Problems. 1. Mr. Jones holds a note of Mr. Brown's, given July 1, 1892, for $200, with interest from date at 6%. On January 1, 1893, Mr. Brown paid $50. On July 1, 1893, he paid $4: what was due Mr. Jones January 1, 1894 ?
2. I am offered a mill for $14,000 on 6 months' time, or for $12,000 cash. I can borrow the money at 8% : will it pay me to do it?
3. I wish to pay a debt of $850. I wish to get the money from a bank for 90 days at 8%: for how much must I draw my note?
4. Bought a bill of goods amounting to $150 with 5% off for 30 days, and a further discount of 5% for cash: if I can borrow the money at 8%, will it pay me to do so? If it will, tell how much I will make. If not, tell what I would lose.
5. If a man receives a salary of $1,500, what sum would he have to insure his life for to make as great an income as his salary, provided money could be loaned at 6%?
ART. 363.—Exchange is a method of paying debts to parties at a distance by means of Drafts or Bills of Exchange.
ART. 364.—Exchange is of two kinds, Domestic and Foreign.
ART. 365.—Domestic or Inland Exchange is that between places in the same country.
ART. 366.—Foreign Exchange is that between different countries.
ART. 367.—A Draft or Bill of Exchange is a written order for the payment of money.
ART. 368.—The Drawer is the person that makes the order.
ART. 369.–The Drawee is the one to whom it is addressed.
ART. 370.—The Payee is the one to whom the money is payable.
ART. 371.-A Sight Draft is payable when presented. In some States, however, three days of grace are allowed.
ART. 372.-A Time Draft is payable a certain time after date, or after sight, including 3 days of grace.
ART. 373.—The Indorsement of a draft is a writing on the back, by which the payee orders the payment of the draft to be made to another party.
ART. 374.—A Letter of Credit is a letter from one banking house to one or more others in foreign countries, directing them to pay the person in whose favor the letter is drawn, any amount of money not exceeding the sum named in the letter.
ART. 375.—A Special Indorsement is an order to pay a draft to a specified party who is called the Indor see.
ART. 376.—The Acceptance of a draft is a written agreement of the drawee, made when the draft is presented, to pay it at maturity. This is done by writing across the face “Accepted,” with the date and the drawee's signature. The draft then becomes an Acceptance, and is of the same nature as a promissory note.
Days of grace are usually allowed on bills of exchange unless a special date is named on which they mature. In New York and several other states no grace is allowed on sight bills.
ART. 377.—The Rate of Exchange is the rate above or below par.
ART. 378.-The rate of exchange between two places depends chiefly on their relative trade. If the trade between St. Louis and San Francisco is equal, exchange is at par. If St. Louis owes San Francisco, the call in St. Louis for drafts on San Francisco exceeds the demand' in San Francisco for drafts on St. Louis; and, as a consequence, the drafts in St. Louis on San Francisco are at a premium, while in the latter city, St. Louis drafts are at a discount.
The cause for this premium and discount is that in St. Louis the banks are forced to the expense of sending the money itself to San Francisco, or be charged with interest on the balance due the San Francisco banks ; the latter sell the St. Louis, drafts at a discount because they are willing to bear such discount in order to receive the money without delay.
If the drawer finds the course of exchange against him, he sometimes equalizes it by the roundabout method of drawing through several intermediate places, between which the rates are favorable.