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446. The Drawer is the person who signs the draft.. 447. The Drawee is the person who is ordered to pay

the money.

448. The Payee is the person to whom it is ordered that the money be paid.

449. A Sight Draft is one which is to be paid when it is presented to the drawee.

450. A Time Draft is one payable at a specified time, after its presentation to the drawee, or after date.

On Time Drafts three days of grace are usually allowed.

451. Accepting a draft is agreeing to pay it when it is due. This is done by the drawee writing “Accepted” across the face of the draft, with his name and the date.

Exchange is of two kinds, viz: Domestic or Inland, and Foreign.

CASE I.

criten md

DOMESTIC EXCHANGE.

452. Domestic Exchange treats of drafts payable in the country where they are made.

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PROCESS.

453. 1. What will be the cost of procuring a sight draft on New York for $5000 at 1%. premium?

ANALYSIS.–Since exchange

on New York is at 1% pre$1+$.00}=1.001

mium, every $1 of the draft $1.001 X 5000=$50 25 will cost $1.001, and a draft

for $5000 will therefore cost the purchaser 5000 times $1.00], which is $5025.

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PROCESS.

2. What will be the cost in New Orleans of a draft on New York, payable 60 days after sight, for $5000, exchange being at 14% premium?

ANALYSIS. Since the

exchange on New York $1.+$.015=$1.015

is at 11% premium,

every $1 of the draft $1.015-$.008}=$1.0064 would cost $1.015 if $1.0061 X 5000=$5031.25 paid at sight. But since

it is not to be paid in New York for 63 days, the banker in New Orleans who has the use of the money for that time, since he is not obliged to pay the money in New York for 63 days, allows the bank discount on the face of the draft for that time. The bank discount on $1, at the legal rate in the State of Louisiana, for the given time, is $.0081, which, subtracted from $1.015, gives $1.006), the cost of $1 of the draft. Since the cost of a draft for $1 is $1.0061, the cost of a draft of $5000 will be 5000 times $1.006), or $5031.25.

3. What will be the cost in Memphis, Tenn., of a sight draft on Cincinnati for $1000, the rate of exchange being 1% premium?

4. If exchange on Chicago is 11% premium, what will be the cost in Savannah, Ga., of a sight draft for $3000?

5. A merchant in Chicago bought a draft on New York for $5000, payable 1 mo. after sight. What did it cost if exchange was š% premium ?.

6. What will be the cost in Detroit, Mich., of a draft for $1500 on Cleveland, O., payable 3 mo. after date, when exchange is % discount?

7. How much will be realized from the sale of a draft for $5000 at 1% discount?

8. How much will be realized from the sale of a draft for $3000 sold at % premium?

9. When exchange is at 1% premium, what will be the cost of a draft for $5000, purchased in Chicago on Omaha, to be paid 3 mo. after date?

10. If exchange is at 1% premium, what will a draft for $1500 cost, purchased in St. Paul, Minn., on Dayton, O., payable in 2 mo., without grace?

11. If exchange is at 1% premium, what will a draft for $5000 on New York cost in Cincinnati, payable 2 mo. after date?

12. How large a draft on New Orleans can be purchased for $5000, when exchange is at 14% premium?

ANALYSIS. ---Since ex$1+$.011=$1.015

change is at 11% pre

mium, it will cost $1.015 $5000:1.015= $4926.11

to buy a draft for $1, and

$5000 will buy a draft for as many dollars as $1.015 is contained times in $5000, or $4926.11.

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PROCESS.

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PROCESS.

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13. How large a draft on. Washington, D. C., payable 60 days after sight, can be bought in Nashville, Tenn., for $3000, when exchange is at 1% discount?

ANALYSIS. — Since ex$1$.01 = $.99

change is at 1% discount,

it would cost $.99 to buy $.99-$.0105=$.9 795 a draft for $1 if it were $3000= .9795=$3062.78 payable at sight; but since

the draft is not to be paid until 63 days, the banker in Nashville who has the use of the money for 63 days, allows bank discount on the face of the draft for that time, or $.0105 for every dollar, Therefore since it costs $.9795 to purchase a draft for $1, $3000 will purchase

draft for as many dollars as $.9795 is contained times in $3000, or $3062.78.

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14. How large a sight draft can be purchased on Chicago for $5725, when the rate of exchange is 1% premium?

15. What will be the face of a 30-day draft purchased for $1500, if the rate of exchange is 3% premium and the rate of discount is 6%?

16. If I pay $1200 for a draft payable in 2 mo., when

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the premium on exchange is 1%, and the rate of discount is 9%, what will be the face of the draft?

17. How large a sight draft on New York can be purchased in Chicago for $10000, if exchange is 3% discount?

18. A commission merchant in St. Louis, Mo., sold goods amounting to $3500 for a man in Denver, Col. He sent the amount due by a draft payable in 1 mo. after sight, èxchange being 1% premium. How large a draft did he purchase?

19. How large a draft at sight on San Francisco, can I purchase for $1750 if exchange is at 3% premium?

CASE II.

FOREIGN EXCHANGE.

454. Foreign Exchange treats of drafts made in one country and payable in another.

Foreign bills of exchange in the United States are drawn on London, Paris, Berlin, Antwerp, Amsterdam, Hamburg, Bremen, and other commercial centers; but drafts on London and Paris are more common, inasmuch as they are paid anywhere on the continent of Europe.

455. A Set of Exchange consists of three drafts or bills of the same date and tenor, named, respectively, the first, second, and third of exchange. They are sent by different mails, so that if one is lost another may be presented. When one bill of the set is paid the others are void.

456. The value of a pound sterling previous to 1873 was fixed at $4.444. In 1873 Congress fixed the value of the sovereign in U. S. gold coin at $4.8665, which is now the par of exchange.

The value of a franc is about $.193, or about 5.18 francs to one dollar in gold. Exchange on Paris is quoted at a certain number of francs to a dollar in gold.

WRIT-T EN EXERCISES.

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457. 1. What is the cost in currency, in New York, of a sight draft on London for £312 15s. 5d., when exchange is $4.87 for a pound sterling and gold at 106.

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ANALYSIS.

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£312 159. 5d. = £312.7708, value in pounds and decimals of a pound.
$4.87 X 312.7708 =$1523,193 +, the cost in U. S. gold.
$1523.193 X 1.06 =$1614.59, the cost in U. S. currency.

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2. How large a bill of exchange at sight on London can be bought in New York for $2984.38 in currency, exchange being at $4.86 for a pound sterling and gold at 107į?

ANALYSIS.

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$2984.38 :- $1.07}= $2776.167, value of currency in gold.
$2776.167 - $1.86 = £571.2263+, value in pounds sterling.
£571.2263 = £571, 4s. 6 d., the face of the draft.

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3. How large a bill of exchange at sight on London can be bought in New York for $3762.50 in currency, when gold is at 105and exchange is at $4.87?

4. What will be the face of a sight draft on London, which is purchased in Philadelphia for $5928.75 in currency, when gold is at 1061 and exchange is at $4.851 ? . 5. What will be the face of a sight draft on London, which is purchased in Norfolk, Va., for $5575.20 in currency, when exchange is at $4.871, and gold is selling at 1077?

6. What must be paid in currency for a bill of exchange on Paris, at sight, for 3269 francs, exchange being at 5.15 francs to the dollar, and gold at 1053?

7. What must be paid in currency for a sight bill of exchange on Paris for 8950 francs, exchange being at 5.19 francs for one dollar, and gold at 1061?

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