8. A Boston merchant sends to a creditor in Savannah a sight draft on Boston for $1498.13; what was the debt, exchange on Boston being at a premium of % ? Ans. $1500. CASE III. 526. Given, the face and the cost of a draft, to find the rate of exchange. 1. A draft on Baltimore for $2000 at 30 days cost me $2030; what was the rate of exchange? SOLUTION. We find that the cost of $1 of the draft, if exchange was at par, is $.995 and of $2000 is 2000 times $.995, or $1990; the difference between $1990 and $2030, the actual cost, is $40, which is the premium; dividing the premium, $40, by the face, $2000, we have the rate, 2%. $1.000 OPERATION. .005 discount for 30 da. $.995-cost of $1 at par. $.995X2000-$1990 $2030-$1990-$40 40÷2000.02, or 2%. Rule. Find the premium or the discount, and divide it by the face, to find the rate. WRITTEN EXERCISES. 2. A Savannah cotton broker bought a 30 day draft on Philadelphia for $3532.08, the face being $3500; what was the rate of exchange? Ans. 1% premium. 3. Sold grain on commission to the amount of $5000; having reserved 2%, I bought with the proceeds a draft for $4814.81, which I remitted to the consignor; what rate of exchange did I pay? Ans. 14% premium. 4. Mr. Bair, of Cincinnati, buys of Hood & Co., Phila., a lot of woollen goods amounting to $750, and forwards in payment a draft at 3 mo., which costs him $727.50; what was the rate of exchange? Ans. 1% discount. FOREIGN EXCHANGE. 527. Foreign Exchange is the exchange that takes place between different countries. A Set of Exchange consists of three bills of the same tenor and date, each containing a condition that it shall continue payable only while the others are unpaid. To prevent loss, or delay, each bill of a set is remitted in a different manner, and when one bill of the set has been paid the others are worthless. 528. The Money of Account of any country consists of the denominations of the money of that country in which accounts are kept. 529. The Act of March 3, 1873, provides that “the value of the standard coins. of the world shall be estimated annually by the Director of the Mint, and be proclaimed on the first day of January by the Secretary of the Treasury.' 530. In accordance with this law, the following table was published by the Secretary of the Treasury, Jan. 1, 1888: 531. Bills of Exchange are usually made payable either 3 days after sight or 60 days after sight. The latter are quoted at a lower rate, on account of the discount. 532. Most of the dealings in foreign exchange are with the commercial centres mentioned in the following table, taken from a recent New York paper: Prime banking sterling bills on London, Good bankers and prime com❜l, Paris (francs), Antwerp (francs), Swiss (francs) Amsterdam (guilders), 60 days. 3 days. 484 @4 844 4 83 @4 84 4 81@4 82 5 217@5 19 5 211@5 19 5 20@5 18 Remittances to and from other places are frequently made in bills on these leading ones, especially London. In the London quotations "prime" bills are those on the best banking houses, "good" are those on houses in good credit, but in less demand than the prime. "Commercial" signifies merchants' drafts, which generally rate below bankers'. In the quotations on Paris, Antwerp, and Switzerland the franc is the unit, and the quotation gives the number of francs and centimes to the dollar. The exchange on Amsterdam is the number of cents to the guilder; while on Hamburg, Frankfort, Bremen, and Berlin, the quotation gives the number of cents in 4 reichsmarks. 4.82@4.83 indicates the highest and lowest prices on the day on which the quotations were made. REMARK.-United States securities are quoted in London on a gold basis instead of a greenback one, of 4 shillings to the dollar, hence they usually appear lower than with us. 533. A Letter of Credit is a letter from a banking house in one country to one or more of their correspondents in another, directing them to pay to the person in whose favor the letter is written, any sum not exceeding a certain amount specified in the letter. 2. What must be paid in New York city for a bill of exchange on London for £450, at 3 days sight, at $4.88 to the pound sterling? SOLUTION.-If £1 cost $4.88, £450 cost 450 times 14.88, which is $2196. Hence the following OPERATION. $4.88 450 $2196.00 Rule.-Find the cost of a unit of the currency in which the bill is given, and multiply the face by it for the cost, or divide the cost by it for the face.. WRITTEN EXERCISES. 2. What will be the cost in Philadelphia of the following draft exchange at 60 days being $4.84 ? Ans. $2420. Exchange for £500. PHILADELPHIA, July 1, 1875. Sixty days after sight of this First of Exchange (second and third unpaid) Pay to the order of Chas. Smith, Five Hundred Pounds Sterling, for value received, and charye the same to account of PETER WRIGHT & SONS. Liverpool. To Messrs. Brown Brothers, 3. What must a merchant in Canton pay for a draft of $1134, if 1 tael-$1.63 ? Ans. 695.71— taels. 4. i wish to remit 5400 francs to Paris; what will a draft cost me in New York, if 1 franc 19.69? Ans. $1058.40. 5. A merchant in London sold a consignment of wheat from Odessa for £420; what will be the face of a draft on Odessa for the amount, if £1=6 roubles 70 copecks ? Ans 2814 roubles. 6. By the first quotation in the table, Art. 532, what amount of exchange on Geneva at 3 days sight will $1200 in gold buy? Ans. 6247.50 francs. SUPPLEMENTARY PROBLEMS. To be omitted unless otherwise directed. 7. At the first quotation, how much exchange on Berlin at 60 days sight, will $1000 currency buy? Ans. 4266.66+ reichsmarks. 8. How much in currency would a bill on Amsterdam for 4000 guilders cost, at the first quotation, 60 days sight, when gold was selling at 113†? Ans. $1806.334. 9. Mecke & Co., of Bremen, wish to remit 4970 reichsmarks to their correspondent in New York; what will be the face of a draft for 3 days at the second quotation? Ans. $1153.584. 10. A commission merchant in Cadiz having sent to his correspondent in Philadelphia an invoice of sherry, valued at 8400 pesetas, draws on him for the cost, exchange being 1 peseta--20.1; what would have been the advantage to the consignee of remitting a draft on Cadiz, 1 peseta being worth 19.3 in Philadelphia ? Ans. $67.20. 11. A gentleman about to visit Europe obtains a letter of credit from Fisk, Hatch & Co., depositing bonds as security; he draws in Paris 2000 francs July 1, the bill of exchange at 60 days reaching New York, July 17; on his return, Sept. 15, he settled the account; what must he pay, commission 1 %, exchange 5.24? Ans. $385.31+. ARBITRATION OF EXCHANGE. 534. Arbitration of Exchange, also called Circular Exchange, is the method of making exchange between two places by means of one or more intermediate exchanges. 535. Simple Arbitration is that in which there is only one intermediate exchange; Compound Arbitration is that in which there are two or more intermediate exchanges. As rates of exchange constantly vary, it is often more advantageous to make the exchange by passing through several intermediate places than by a direct remittance, and the object of arbitration is to enable a person to ascertain which will be most profitable. OPERATION. 1. A merchant wishes to pay a debt in Paris of 4680 francs, remitting through London, exchange between Paris and London being at £1-26 francs, and between London and New York £1-$4.90; what will it cost in New York? SOLUTION.-If we represent the required number of dollars by x, we have x=4680 francs, 26 francs = £1, and £1=$4.90. Now, the product of the first set of values will equal the product of the second set; hence the product of the second set, divided by the product of all the first set except x, will equal x, from which we have x= $x4680 francs 26 f.= £1 £1 $4.90 x= $882 = $882. 2. A merchant in Savannah wishes to remit $2000 to Cincinnati; exchange on New Orleans is % premium; between New Orleans and St. Louis 1% discount; between St. Louis and Cincinnati % discount; what was the value of the remittance in Cincinnati if sent through these cities? SOLUTION.-According to the given rates =$1 in New Orleans; $1.00 in Savannah $1 in St. Louis; and $0.99 in St. Louis=$1 in Cincinnati; hence, as above explained, x= = $2025.29. OPERATION. = = x Cin. $2000 S. $1.00 S. $1 N. O. $0.99 N.O.=$1 St. L. $0.99 St. L. $1 Cin. r = $2025.29 Rule.-I. Represent the sum required by x, affixing the proper unit of currency, place it equal to the given sum, |