$5,000.

ART. 379.-Domestic Exchange.

BANK DRAFT (SIGHT).

First National Bank, St. Louis,

St. Louis, Mo., January 12, 1886.

At sight pay to the order of George W. Smith five thousand dollars.

To Taylor Bros.,

Detroit, Mich.

William M. Cooper, Cashier.

Explanation.-George W. Smith, of St. Louis, owed Thorndike Preston, of Detroit, $5,000, and procured the above draft from a bank in St. Louis, by depositing the amount (with premium added or discount deducted, as the case may be), if it did not already stand to his credit. He wrote on the back of the draft, "Pay to the order of Thorndike Preston," and signed his name. He then forwarded it to Thorndike Preston, Detroit, who indorsed it with his own name, and presented it to Taylor Bros., bankers in Detroit, where it was immediately paid, or if he preferred, placed to his credit.

MERCHANT'S DRAFT (TIME).

$10,000.

St. Louis, Mo., May 21, 1886.

Sixty days after sight, pay to the order of W. D. Holt, ten thousand dollars, and charge to account of Becktold & Co.

To William T. West,

New York City.

Explanation.—Becktold & Co., of St. Louis, are indebted to William D. Holt, of New York, and William T. West, of New York, owes Becktold & Co., of St. Louis. In order to save the expense of shipping money to and from New York, Becktold & Co. draw upon William T. West, and remit the draft to W. D. Holt, of New York. Mr. Holt presents this draft to William T. West,

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who accepts it by writing across its face in red ink, the words : Accepted, May 24, 1886, William T. West." The draft now becomes an acceptance, and William T. West is responsible for its payment. Mr. Holt may now present this acceptance at bank for discount, in the same manner as negotiable notes are presented. In order to hold the drawer of a draft responsible for its payment in case the drawee does not accept it, the payee must have it protested for non-acceptance.

ART. 380.-To find the cost of a sight or a time draft. WRITTEN EXERCISES.

1. What is the cost of a sight draft on Cincinnati for $1,250, at 11% premium?

Process. Since the rate is 14%, the course of exchange is $1.01 on every $1. The cost of $1,250, therefore, is $1.01 × 1,250 = $1,265.63.

NOTE. The pupil should frame a rule.

2. What is the cost of a draft for $1,000, payable in 60 days after sight, at 5% interest, exchange at 1% premium? Process. Since the premium is 1%, the rate of exchange is 1.00. The bank discount at 5% for 63 days is $.00875; the cost of exchange for $1, therefore, is $1.005 $.00875 = $.99625, and the cost of $1,000 is $.99625 × 1,000 = $996.25.

NOTE. The pupil should frame a rule.

Find the cost of

3. A sight draft for $480, premium 21%. 4. A sight draft for $960, discount 14%.

5. A sight draft for $800, premium 4%.

6. A sight draft for $1,885, premium 11%.

7. A draft for $840, premium 11%, time 80 days, interest 7%.

8. A draft for $2,500, discount 14%, time 90 days, interest 6%.

9. A draft for $4,700, discount 3%, time 60 days, interest 5%.

10. A draft for $500, discount 4%, time 30 days, interest 5%.

11. A draft for $10,000, premium 1%, time 70 days, interest 7%.

12. Illustrate Art. 379, by an original problem.

ART. 381.-To find the face of a sight or a time draft.

WRITTEN EXERCISES.

1. How large a draft will $1,989 buy, exchange being 2% premium ?

Process. Since the rate of premium is 2%, the cost of exchange for $1 is $1.02. $1,989, therefore, will buy as many times $1 as $1.02 is contained times in $1,989, equal to $1,950.

NOTE. The pupil should frame a rule.

2. What is the face of a draft on New Orleans, at 90 days, bought for $1,989, exchange being 101, interest 6% ?

Process. Since the course of exchange is 101, the cost of $1 is $1.01, payable at sight; but the bank retains the money 93 days, and therefore must allow bank discount for that time. Hence, the cost of exchange is $1.01 $.0155 = $.9945, and $1,989 will buy as many dollars as $.9945 is contained times in $1,989, equal to $2,000.

9. What is the face of a 90-day draft costing $800,

premium 14, interest 6% ?

£500.

ART. 382.-Foreign Exchange.

New York, March 2, 1886.

Thirty days after sight of this First of Exchange (Second and Third unpaid), pay to the order of J. J. Little, five hundred pounds sterling, for value received, and charge the same to account of

To Harvey & Son,

London, Eng.

Johnson Brothers.

The foregoing is the form of the first bill of exchange. Two other bills are forwarded (changed only in the substitution of the words "Second" and "Third" respectively for "First") and, with a view of guarding against loss, each is sent in a different manner. The three form a Set of Exchange, and when one is paid the others become valueless.

Most of the foreign exchange is effected through the great commercial centers of London, Paris, Berlin, Antwerp, Frankfort. Hamburg, Bremen, and Amsterdam.

WRITTEN EXERCISES.

1. What is the cost of a bill of exchange on London for £350 5s. 6d., exchange being at $4.87?

Process.-£350 5s. 6d. = £350.275; $4.87 × 350.275

= $1,705.84.

2. What is the cost of a bill of exchange on Paris for 4,500 francs at $.193?

Process.-$.193 x 4,500 $868.50.

ART. 383.—Rule for finding the cost of Exchange.—Multiply the cost of a unit of the currency in which the bill is given by the face of the bill.

3. What is the cost of a bill on Berlin for 2,700 marks at $.238?

4. What is the cost of a bill on Amsterdam for 3,500 guilders at $.40, brokerage %?

5. What is the cost of a bill on Madrid for 4,600 pesetas at $.193, brokerage %?

6. What is the cost of a bill on Edinburgh for £1,250 at $4.87, brokerage %?

7. Find the cost of a bill on Bremen for 1,780 reichsmarks at $.238, brokerage 1%.

8. Messrs. Ribsam & Co., of Hamburg, remitted 5,000 reichsmarks to their correspondents in New York. What was the face of the draft, exchange being at $.238 ?

9. A gentleman in St. Louis obtained letters of credit from Seligman & Company. In Paris he drew 1,500

what did it cost him, if

francs, and in London £100 exchange in Paris was 1% premium, in London 1%, and gold was worth $1.10 ?

10. Illustrate by an original problem the method of determining the cost of a bill of foreign exchange.

Equation of Payments.

ART. 384.-Equation of Payments is the method of finding the medium or average time for the payment of several debts due at different times.

ART. 385. The Equated Time is the date on which the several sums due at different times should be paid.

ART. 386.-The Time of Credit is the time the debt has to run before it becomes due.

ART. 387.-The Average Term of Credit is the time at the end of which the several debts, due at different times, are equitably payable in one sum.