633. PROB. XIII.-To find the face of a note when the proceeds, time, and rate are given.

Observe, that the proceeds is the face of the note minus the interest on it for the given time and rate, and consequently that the proceeds must contain $1 minus the interest of $1 for the given time and rate as many times as there are dollars in the face of the note. Hence the following

634. RULE.-Divide the given proceeds by the proceeds of $1 for the given time and rate; the quotient is the face of the note.

635. What must be the face of a note which will give 1. For 3 mo. 17 da., at 6%, $860 proceeds? $290? $530.80? 2. For 90 da., at 7%, $450 proceeds? $186.25? $97.32? 3. For 73 da., at $8%, $234.60 proceeds? $1800? $506.94? 4. What must be the face of a note for 80 days, at 7%, on which I can raise at a bank $472.86?

5. The avails of a note for 50 days when discounted at a bank were $350.80; what was the face of the note?

6. How much must I make my note at a bank for 40 da., at 7%, to pay a debt of $296.40?

7. A merchant paid a bill of goods amounting to $2850 by discounting three notes at a bank at 7%, the proceeds of each paying one-third of the bill; the time of the first note was 60 days, of the second 90 days, and of the third 154 days. What was the face of each note?

8. For what sum must I draw my note March 23, 1876, for 90 days, so that when discounted at 7% on May 1 the proceeds may be $490?

9. Settled a bill of $2380 by giving my note for $890 at 30 days, bearing interest, and another note at 90 days, which when discounted at 7% will settle the balance. What is the face of the latter note?

EXCHANGE

636. Exchange is a method of paying debts or other obligations at a distance without transmitting the money.

Thus, a merchant in Chicago desiring to pay a debt of $1800 in New York, pays a bank in Chicago $1800, plus a small per cent for their trouble, and obtains an order for this amount on a bank in New York, which he remits to his creditor, who receives the money from the New York bank. Exchange between places in the same country is called Inland or Domestic Exchange, and between different countries Foreign Exchange.

637. A Draft or Bill of Exchange is a written order for the payment of money at a specified time, drawn in one place and payable in another.

1. The Drawer of a bill or draft is the person who signs it; the Drawee, the person directed to pay it; the Payee, the person to whom the money is directed to be paid; the Indorser, the person who transfers his right to a bill or draft by indorsing it; and the Holder, the person who has legal possession of it.

2. A Sight Draft or Bill is one which requires payment to be made when presented to the payor.

3. A Time Draft or Bill is one which requires payment to be made at a specified time after date, or after sight or being presented to the payor. Three days of grace are usually allowed on bills of exchange.

4. The Acceptance of a bill or draft is the agreement of the party on whom it is drawn to pay it at maturity. This is indicated by writing the word "Accepted" across the face of the bill and signing it.

When a bill is protested for non-acceptance, the drawer is bound to pay it immediately.

5. Foreign bills of exchange are usually drawn in duplicate or triplicate, and sent by different conveyances, to provide against miscarriage, each copy being valid until the bill is paid.

638. The Par of Exchange is the relative value of the coins of two countries.

Thus, the par of exchange between the United States and England is the number of gold dollars, the standard unit of United States money, which is equal to a pound sterling, the standard unit of English money. Hence $4.8665 = £1 is the par of exchange.

DOMESTIC EXCHANGE.

639. Domestic Exchange is a method of paying debts or other obligations at distant places in the same country, without transmitting the money.

$890.

Forms of Sight and Time Drafts.

THIRD NATIONAL BANK OF ROCHESTER, Į
ROCHESTER, N. Y., May 4, 1876.

At sight, pay to the order of Chas. D. McLean, eight hundred ninety dollars.

WILLIAM ROBERTS, Cashier.

To the SEVENTH NATIONAL BANK,

NEW YORK, N. Y.

This is the usual form of a draft drawn by one bank upon another.

$2700.

SYRACUSE, N. Y., July 25, 1876. At fifteen days sight, pay to the order of Taintor Brothers & Co., two thousand seven hundred dollars, value received, and charge the same to the account of

A. B. STEWART & Co.

1. This is the usual form of a draft drawn by a firm or individual upon a bank. It may also be made payable at a given time after date.

2. All time drafts should be presented for acceptance as soon as received. When the cashier writes the word Accepted," with the date of acceptance across the face, and signs his name, the bank is responsible for the payment of the draft when due.

METHODS OF DOMESTIC EXCHANGE.

640. FIRST METHOD.-The party desiring to transmit money, purchases a draft for the amount at a bank, and sends it by mail to its destination.

Observe carefully the following:

1. Banks can sell drafts only upon others in which they have deposits in money or equivalent security. Hence banks throughout the country, in order to give them this facility, have such deposits at centres of trade, such as New York, Boston, Chicago, etc.

2. A Bank Draft will usually be purchased by banks in any part of the country, in case the person offering it is fully identified as the party to whom the draft is payable. Hence, a debt or other liability may be discharged at any place by a draft on a New York bank.

3. A draft may be made payable to the person to whom it is sent, or to the person buying it. In the latter case the person buying it must write on the back "Pay to the order of" (name of party to whom it is sent), and sign his own name.

SECOND METHOD.-I. The party desiring to transmit money, deposits the amount in a bank and takes a certificate of deposit, which he sends as by first method. Or,

II. If he has a deposit already in a bank, subject to his check or order, it is customary to send his check, certified to be good by the cashier of the bank.

This method, in either of these forms, is ordinarily followed in making payments at a distance by persons in New York and other large centres of trade. Banks in such places have no deposits in cities and villages throughout the country, and hence do not sell drafts.

Certificates of deposits and certified checks are purchased by banks in the same manner as bank drafts.

THIRD METHOD.-The party desiring to transmit money, obtains a Post Office order for the amount and remits it as before.

As the amount that can be included in one Post Office order is limited, this method is restricted in its application. It is usually employed in remitting small sums of money.

FOURTH METHOD.-The party desiring to transmit money, makes a draft or order for the amount upon a party owing him, at the place where the money is to be sent, and remits this as previously directed.

1. By this method one person is said to draw upon another. Such drafts should be presented for payment as soon as received, and if not paid or accepted should be protested for non-payment immediately.

2. Large business firms have deposits in banks at business centres, and credit with other business firms; hence, their drafts are used by themselves and others the same as bank drafts.

641. The Premium or Discount on a draft depends chiefly on the condition of trade between the place where it is purchased and the place on which it is made.

Thus, for example, merchants and other business men at Buffalo contract more obligations in New York, for which they pay by draft, than New York business men contract in Buffalo; consequently, banks at Buffalo must actually send money to New York by Express or other conveyance. Hence, for the expense thus incurred and other trouble in handling the money, a small premium is charged at Buffalo on New York drafts.

642. 1. What is the cost of a sight draft for $2400, at 3% premium?

=

SOLUTION.-Cost $2400 + % of $2400 $2416.

2. What is the cost of a draft for $3200, at 1% premium ? $3200 + }% of $3200

SOLUTION.-Cost =

Find the cost of sight draft

3. For $834, premium 2%. 4. For $6300, premium 1%.

5. For $132.80, premium 2%.

=

$3204.

6. For $1500, discount 3%.
7. For $384.50, discount 4%.

8. For $295.20, discount 13%.

9. The cost of a sight draft purchased at 11% premium is $493.29; what is the face of the draft?

SOLUTION.-At 11% premium, $1 of the face of the draft cost $1.015. Hence the face of the draft is as many dollars as $1.015 is contained times in $493.29, which is $486.