2. Of a bill of exchange on Liverpool, for £473 5s. 9d. par value, in gold.

3. Of a bill of £625 4s. 3d. sterling, at 4.834, gold 1.093. 4. Of a bill on Paris for 495 francs, at 5.15 francs to the dollar, in gold.

+

OPERATION.-495 ÷ 5.15 = $96.12, gold value of the bill.

ANALYSIS.-Since 5.15 francs cost $1,495 francs will cost as many dollars as 5.15 francs are contained times in 495 francs, or $96.12.

5. Of a bill on Antwerp for 6971 francs, at 5.173 francs to the dollar, in gold.

6. Of a bill on Geneva, Switzerland, for 1655 francs, at 5.15ğ, in currency, gold being 1.097.

7. Of a bill on Frankfort for 650 marks, at 943, in gold. OPERATION.-$.94375 ÷ 4 × 650 = $153.36.

ANALYSIS.-Since $.94 is the value of 4 marks, 650 marks are worth 650 times of $.943, or $153.36.

8. Of a bill on Berlin for 1750 marks, quoted at 961, in gold.

9. Of a bill on Hamburg for 2155 marks, at 95%, in currency, gold being 1.101.

10. Of a bill on Amsterdam for 2500 guilders, quoted at 41, brokerage 1%.

OPERATION.-$.41625 × 2500 = 1040.625.

11. Of a bill on Amsterdam for 1950 guilders, at 411. 12. Bought exchange on Amsterdam, at 411, for 3750 guilders; on Hamburg, at 95 for 1000 marks; and on London for £500, at $4.85. What was the cost of the whole in currency, gold selling at 109 ?

13. What will it cost to remit directly from Boston to Amsterdam, 12560 guilders, at 41?

14. What will be the cost of remitting 13550 marks from New York to Frankfort, exchange selling at 941, and gold at 109; brokerage, %?

707. What will be the face

1. Of a bill of exchange on London that can be bought for $5500, in currency, exchange selling at 4.86, and gold at 1.10?

OPERATION.-$5500 currency +1.10 $5000, gold. (519.)

=

$5000 $4.86 = 1028.806 +.

£1028.806 £1028 168. 11d.

2. Of a bill on Manchester, England, that can be bought for $7500, gold; rate of exchange, 4.86 ?

3. Of a bill on Berlin that cost $4000 in gold, exchange 934 ?

OPERATION.-($4000 ÷ $.9375) × 4 = 17066% marks.

ANALYSIS.-Since $.933 will buy 4 marks, $4000 will buy 4 times as many marks as $.93 is contained times in $4000, or 170663 marks. 4. Of a bill on Hamburg that cost $550 in gold, exchange 943?

5. Of a bill on Frankfort that cost $395.75 in gold, exchange 951?

6. Of a bill on Geneva, Switzerland, that cost $325 in gold, exchange at 5.17?

OPERATION.-5.17 fr. × 325 = 1680.25 francs.

ANALYSIS.—If $1 will buy 5.17 francs, $325 will buy 325 times 5.17 francs, or 1680.25 francs.

7. A merchant in New Orleans gave $6186, currency, for a bill on Paris, at 5.154. What was its face?

8. What is the face of a bill on Antwerp, that may be purchased in New York for $2500, exchange at 5.164 ?

ARBITRATION OF EXCHANGE.

708. Arbitration of Exchange is the process of computing the cost of exchange between two places by means of one or more intermediate exchanges. Such exchange is said to be indirect or circuitous.

By this computation the relative cost of direct and indirect exchange is ascertained. Sometimes, owing to the course of exchange between different places, it is more advantageous to remit by the latter than by the former.

Arbitration is either simple or compound.

709. Simple Arbitration is that in which there is but one intermediate place.

710. Compound Arbitration is that in which there are several intermediate places.

WRITTEN EXERCISES.

711. 1. I owe 1500 marks to a merchant in Frankfort. Should I remit directly from New York, or through London, exchange on Frankfort being 94, on London, 4.87, and in the latter place on Frankfort 20.75 marks to the pound, and the London brokerage 1% ?

OPERATION.-$.94 × 1500÷4=$352.50, cost of direct exchange. 1500 marks÷20.75 marks = £72.29.

£72.29+% = £72.38.

$4.8772.38 = $352.85.

$352.85 $352.50 $.35, loss by ind. exchange.

=

2. What will it cost to remit from Boston to Berlin 750 marks, by indirect exchange, through Paris, exchange in New York on Paris being at 5.15, and 4 marks at Paris being worth 4.91 francs, the brokerage being at 1%?

3. What will it cost to remit 2500 guilders from New York to Amsterdam, through London and Paris, the rates of exchange being as follows: at New York on London 4.83, at London on Paris 24.75 francs to the pound, and at Paris on Amsterdam 2.09 francs to the guilder, brokerage at London and Paris 4% each?

ANALYSIS. Since the members of each equation are equal, the product of the corresponding members of any number of equations are equal; hence, the product of all the second members divided by the product of all the first members except one, must give that member, which is the value required.

4. A merchant in St. Louis directs his agent in New York to draw upon Philadelphia at 1% discount, for $1500 due from the sale of mdse.; he then draws upon the New York agent, at 2% premium, for the proceeds, after allowing the agent to reserve 1% commission. What sum does he realize from his mdse. ?

By cancellation, .15 x 99 x 102 x .995 $1507.13

ANALYSIS.-$100 on Philadelphia = $99 on N. Y., and $100 on N. Y. $102 on St. Louis; and since the agent reserves 1% commission, $1 realized $.995 net proceeds. Arranging, canceling,

=

and multiplying, we find the result to be $1507.13.

RULE.-I. Represent the required sum by (x), with the proper unit of currency affixed, and place it equal to the given sum on the right.

II. Arrange the given rates of exchange so that in any two consecutive equations the same unit of currency shall stand on opposite sides.

III. When there is commission for drawing, place 1 minus the rate on the left if the cost of exchange is required, and on the right if proceeds are required; and when there is commission for remitting, place 1 plus the rate on the right, if cost is required, and on the left, if proceeds are required.

IV. Divide the product of the numbers on the right by the product of the numbers on the left, canceling equal factors, and the result will be the required sum.

Commission for drawing is commission on the sale of a draft; commission for remitting is commission on the purchase price of a draft.

The above method of operation is sometimes called the Chain Rule.

5. If at New York exchange on London is 4.841, and at London on Paris it is 25.73 francs to the £, what is the arbitrated course of exchange between New York and Paris?

6. If in London exchange on Paris is 25.71, and in New York on Paris it is 5.15, what is the arbitrated course of exchange between New York and London?