15. If I pay a debt of $4725 1 yr. 3 mo. 15 da. before it is due, what discount should be made from the face of the debt, money being worth 8%? 16. Bought 850 barrels of pork at $21.50 per barrel, on 3 mo. credit, and sold it the same day for $21.50 per barrel, cash. How much did I gain, money being worth 61%? 17. How much will I gain if, instead of paying $5400, cash, for a piece of property, I pay $6000 in 1 yr. 4 mo., money being worth 9%? 18. How much should be discounted on a bill of $3725.87, due in 8 mo. 10 ḍa., if it is paid immediately, money being worth 10%? 19. Bought 250 barrels of granulated sugar, weighing 282 lb. each, at 10 cents per lb., on 1 mo. credit. How much cash would settle the account, money being worth 8%? 20. A crockery dealer bought $3725 worth of goods, for cash, at a discount of 37% from the regular list prices, and sold them at the regular list prices on 4 months' time. How much did he gain, money being worth 8%? BANK DISCOUNT. 367. A Bank is an institution established by law to receive money for safe-keeping, to loan money, or to issue notes or bills to circulate as money. 368. A Check is a written order upon a bank for money deposited with it. 369. Bank Discount is the simple interest on the amount due, paid in advance, for 3 days more than the specified time. 370. The Proceeds, or Avails, of a note are the face of the note, less the discount. 371. The Maturity of a note occurs on the last day of grace. If the last day of grace falls on Sunday or a legal holiday the note matures one day earlier, 372. The Term of Discount is the number of days from the time of discounting to the maturity of the note. 1. Banks usually discount for short terms, not exceeding 3 mo. or 4 months. 2. Unless otherwise specified, 30 days are a month; 65 days, 2 mo. 5 da., etc. 3. Bank discount is undoubtedly wrong in principle, but has been sanctioned by custom. CASE I. 373. To find the Bank Discount and Proceeds. 1. What is the bank discount of $385 for 3 mo. at 6%? PROCESS. $385, Face of Note. .0155, Rate of Discount. $5.9675, Discount. $385-$5.9675 $379.0325, Proceeds. ANALYSIS. Since banks, in discounting, require the simple interest in advance, we find the interest of $385 for 3 mo. 3 da. at 6%, which is $5.9675. And since the present worth is the face of the debt minus the discount, we subtract $5.9675 from $385, which gives $379.0325, the proceeds or avails. RULE. To find the bank discount: Compute the interest on the face of the note for 3 days more than the specified time at the given rate. To find the proceeds: Subtract the bank discount from the face of the note. If the note bears interest, find the discount on the amount of the note at its maturity. This amount, less the discount, will be the proceeds. Find the bank discount of: 2. $ 318.25 for 2 mo. 15 da. at 6%. 10. $375. CHICAGO, ILL., Dec. 20, 1876. Two months after date, for value received I promise to pay E. D. Bronson, or order, Three Hundred Seventy-Five Dollars, with interest at 10%, at the First National Bank, Chicago, Ill. S. HOWARD BLACKWELL. This note was discounted Jan. 23, 1877, at 10%. What was the bank discount? What were the proceeds? 11. What is the bank discount on a note for $890.25 at 2 months, the rate being 7%? What are the proceeds? 12. What is the difference between the bank discount and the true discount, on a note for 3 months for $3725.85, the rate being 8%? 13. $15,725.95. ST. PAUL, MINN., May 15, 1876. For value received, two months after date "The North River Sugar Refining Co." promises to pay Messrs. Smith & Haughton, or order, Fifteen Thousand Seven Hundred Twenty-five 15% Dollars, at The Merchants National Bank, New Orleans, La. NORTH RIVER SUGAR REFINING CO., BY C. MOLLER, Sec'y. 95 The above note was discounted May 25, 1876, at 6%. What was the discount? What were the proceeds? 14. Mr. A. sold goods amounting to $3782.75, and received in payment a note at 3 mo., without interest, which he had discounted at a bank after holding it 1 mo. How much did he realize from the sale, the rate of discount being 8%? 15. A merchant sold 32 yards of silk velvet at $8.75 per yard; 48 yards of silk at $2.80 per yard; 25 yards of English broadcloth at $6.25 per yard; receiving in payment a bank note payable in 1 mo. 15 da., without interest, which he had discounted on the same day at 9%. How much did he realize in cash from the sale? CASE II. 374. To find the face of a note when the proceeds, time, and rate are given. 1. What is the bank discount of $1 for 2 mo. 27 da. at 6%? What the proceeds? 2. Since $.985 is the proceeds of $1 when discounted at 2 mo. 27 da. at 6%, of what sum is $1.97 the proceeds for the same time and rate? Of what sum is $2.955 the proceeds for the same time and rate? 3. Of what sum is $394 the proceeds, when discounted at a bank for 1 mo. 27 da. at 6%? Of what sum is $197 the proceeds? 4. Of what sum is $396 the proceeds, when discounted at a bank for 1 mo. 27 da. at 6%? 5. The proceeds of a note discounted at a bank for 2 mo. 12 da. at 7% were $1182.50. What was the face of it? $1182.50.98541 = $1200 The face of the note. $1182.50 are the proceeds of as many dollars as $.9854 is contained times in $1182.50, which is 1200 times. Therefore the face of the note was $1200. RULE.-Divide the proceeds by the proceeds of $1, at the given rate for 3 days more than the specified time. 6. The proceeds of a note discounted at a bank for 2 mo. at 6% are $989.50. What was its face? 7. What must be the face of a note so that when discounted at a bank for 3 mo. at 6%, the proceeds will be $1969? 8. A merchant wishes to use $975, which he can secure by giving a bank note payable in 2 mo., to be discounted at 7%. For what sum must the note be written? 9. For what sum must a note be drawn payable in 3 mo., so that when discounted at 6% the proceeds may be $1000? 10. A man owes a debt of $1375.38, which he can meet by giving his note payable in 3 mo., discounted at 9%. For what sum must the note be written so that the avails may be just large enough to discharge the debt? 11. For what sum must a note be drawn, payable in 15 days, so that when discounted at 8% the proceeds may be $1257.25? 12. A speculator wishes to raise $5250 on an indorsed note, payable in 1 mo. 15 da., discounted at 7%. For what amount must he draw the note so that the proceeds may be exactly that sum? 13. For what amount must a note be made payable in 3 mo., and discounted at 12%, so that the proceeds may be $1875? 14. A merchant wishes to raise $500 at a bank by a note for 2 mo. For what sum must the note be drawn that he may receive $500 in cash from the banker after paying the discount at 8%? 15. For how large a sum must a note be drawn, payable in 3 mo., that the net proceeds may be $15000 after deducting the bank discount at 8%? |