Edward Reed eight hundred dollars, on demand, with in terest. John Brown. Let the scholar write each of the above notes and explain their meaning, and the meaning of all their points; let him also change their form. and indorse them in various ways. 187. Banks and Banking. (a.) A bank is an institution or corporation for the purpose of trafficking in money. (b.) Banks usually receive money on deposit, loan money on interest, and issue bank notes, or bank bills, i. e., notes payable in specie to the bearer on demand at the bank, and intended to circulate as money. (c.) When money is loaned by a bank, it is commonly made payable at the end of a given number of days, and the interest for that time and the three days of grace is deducted at the time it is borrowed. Thus, on a note of $500, payable in 30 days, I shall receive at a bank $500, minus the interest of $500 for 33 days, i. e., $500 $2.75 = $497.25 (d.) By this arrangement the banks receive interest on a larger sum of money than they lend. Thus, in the above example, the bank receives interest on $500, while the sum actually lent is only $497.25. (e.) Bank interest is called DISCOUNT, because it is thus deducted from the face of the note, i. e., from the sum for which the note is given. (f) The note on which the money is received is said to be DISCOUNTED. (g.) To present a practical illustration of this subject, we will suppose the following case: On May 9, 1855, George Guild, being in want of money, wrote a note promising to pay at the Merchants' Bank, to the order of Alfred Hall, $600, in 60 days, and got Mr. Hall to indorse it. He then applied to the officers of the bank to discount it, and they decided to do so. He forthwith presented the note to the cashier, who deducted the interest of $600 for 63 days, and paid him the balance, $593.70. Guild took the money, and had the use of it till July 11, when the note became due. He then paid to the cashier of the bank the $600 due on the note, and the transaction was settled. (h.) By considering the above, it will be seen that Guild paid to the bank the $593.70 which he had borrowed, together with the interest of $600; so that he paid the interest of $6.30 (i. e., of the bank discount) more than he had the use of. (¿.) If he had wished to keep the money as much longer, he would on the last day of grace have written a new note, differing from the former only in the date, and have got it indorsed as before. As this new note would be worth $593.70 at the bank, he could by giving it, and $6.30 besides, to the cashier, pay the amount due at the bank. At the end of 63 days he would again owe the bank $600. (j.) Now, it is obvious that during all this time he has been paying the interest of $600, while he has had the use of but $593.70, and that therefore he has paid the interest of $6.30 more than he has used. Besides this he loses the use for 63 days of the $6.30 he paid on renewing the note. Hence, as the use of a sum is worth its interest, he virtually pays the interest of $6.30 more than he receives for 126 days +63 days, or 189 days. (k.) If Mr. Guild should fail to appear at the bank to pay the note before the close of bank hours on the last day of grace, the note would be protested, and notice sent by a notary public to Mr. Hall, who would then be held responsible for its payment. 1. A note of $1200, payable in 60 days, was discounted at a bank at 6 per cent. How much was received on it? Solution. The interest of $1200 for 63 days, being 2 dimes per day, is $12.60, which, deducted from $1200, leaves $1187.40 as the sum received. 2. How much would be received at a bank on a note of $200, payable in 90 days? 3. How much would be received at a bank on a note of $360, payable in 30 days? 4. I got my note for $1000, payable in 90 days, discounted at a bank, and immediately put the money received on it at interest. When the note became due, I collected the amount of what I had put on interest, and paid my note at the bank. How much did I lose by the transaction? How does the sum lost compare with the interest of the bank discount for the given time? 5. My note for $1000, payable in 6 months, was discounted at a bank, and I immediately put the money received on it at interest. When the note became due, I collected the sum due me, and paid that which I owed at the bank. How much did I lose by the transaction? 6. I had my note for $500, payable in 2 months, discounted at a bank, and immediately put the money on interest. When the note became due, I renewed it for the same time as before; and when the new note became due, I collected the amount due me, and paid my note at the bank. did I lose? How much Suggestions. From a consideration of the methods of reckoning interest at banks, it is evident that from the time the first note was discounted to the time the second was paid, I paid interest on the bank discount more than I received, and that at the end of two months three days I paid a sum equal to the bank discount. Hence, I lost the interest of the bank discount for 4 mo. 6 da., plus 2 mo. 3 da., 6 mo. 9 da. Or, since I paid nothing at the bank, except the bank discount at the time of renewing the note, and the second note when it became due, the actual value, at the time of settlement, of the sums paid, will be the amount of the bank discount for 2 mo. 3 da., plus the face of the note The sum received will be the amount for 4 mo. 6 da. of the monoy ob tained at the bank on the first note. The difference between the values paid and received is the loss. 7. I had my note for $600, payable in 4 months, discounted at a bank, and immediately lent the money received on it for just one year. When my note at the bank became due, I renewed it for the same time as before, and when this new note became due, I renewed it for such time that it became due at the end of the year, when I collected the amount of the sum I had lent, and paid my note at the bank. How much did I lose by the transactions? 188. English Method of computing Interest. (a.) In England, time is reckoned in years and days, but never in months. The year is regarded as 365 days. Interest is usually computed by first finding it for the years, and then for the days. (b.) In computing it for the days, it is well to notice that 73 days of 1 year, that 5 days of 1 year, and that 1 day = 35 of 1 year. = (c.) When any part of the principal is expressed in shillings, pence, and farthings, it should be reduced to the decimal of a pound.* * Probably the simplest method of doing this is to regard each shilling as go, or .05 of £1, and each farthing as go, or .00124 of £1. We shall then have as many times .05 of £1 as there are shillings, plus as many times .0014 of £1 as there are farthings in the pence and farthings. But as all values less than of .001 of £1 are so small that they may be disregarded, the result will be sufficiently accurate for ordinary purposes, if we regard each farthing as .001 of £1, observing to add .001 if there are more than 12 and less than 36 farthings, and .002 if there are more than 36. By adding this result to the value of the shillings, we shall have the decimal expression required. For example: To find what part of £1 is equal to 9 s. 8 d. 1 qr., we have 9 s. 9 times £.05 = £.45; 8 d. 1 qr. 33 qr. £.033+ £.001 £.034 Therefore, 9 s. 8 d. 1 qr. = £.45+ £.031 The reverse operation will get the value of the decimal expresgion, in terms of shillings, pence, and farthings. = £.484 = 1. What is the interest of £327 17 s. 7 d. from May 7. 1851, to Sept. 4, 1852, at 5 per cent? Solution. - From May 7, 1851, to May 7, 1852, is 1 year. There are 24 days left in May, to which adding the 30 in June, the 31 in July, the 31 in August, and the 4 in September, gives 120 days. is 1 year 120 days. The principal equals £327.879 the following written work: The time, then, Hence we have Calling this £21.784, we have £21 15 s. int. for 115 da. int. for 1 yr. 120 da. 8 d. 1 qr. as the answer. The multiplications required in solving these examples render it necessary to carry out the work to places below thousandths, though we do not care to have them appear in the answer. 2. What is the interest of £47 9 s. 4 d. 1 qr. from May 17, 1849, to Aug. 23, 1852, at 5 per cent? 3. What is the interest of £148 19 s. 9 d. 3 qr. from Oct. 23, 1850, to Nov. 11, 1852, at 5 per cent? 4. What is the amount of £361 13 s. 2 d. 1 qr. from July 18, 1847, to April 12, 1850, at 5 per cent? 5. What is the amount of £248 18 s. 10 d. 3 qr. from Dec. 5, 1849, to March 3, 1852, at 41 per cent? 6. What is the interest of £548 15 s. 7 d. 3 qr. from July 29, 1847, to March 12, 1850, at 21 per cent? 7. What is the amount of £258 19 s. 5 d. 2 qr. from Jan. 1, 1849, to Sept. 29, 1852, at 4 per cent? |