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BANKING.

Bank Discount is reckoned on the face of the note the same as interest.

It is called discount, as the interest for the time the note is given and three days grace is deducted from the face of the note, and the borrower receives the difference. A note in bank is not considered due until three days after the time specified.

The bank discount on a rate for

5

$100 at 60 days = 1$$ x To X == $1.05.

100

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=

$100 at 90 days = 108 xa = = $1.55.

1ØØ

9.8 880 :

a Proceeds $100 $1.55 = $98.45.

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Produce $324 $5.02 = $318.98.

A bank account is closed at the end of the year, and the next year is begun by bringing forward the balance which belongs to the credit side of account, as overdrawing is not.permitted.

To this balance each deposit is added at the date on which it is made, and from the sum on the credit side is subtracted each sum drawn by check at its date.

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Each sum or balance is multiplied by the number of days from its date until the next transaction ; lastly, the difference at the last transaction by the time until the end of the year.

The sum of all these products will be the number of days that one dollar is at interest.

The last sum or difference on the credit side will be the principal.

DR. JAMES KENNEDY in acct. with MERCHANTS' BANK, CR.

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This account is rendered for one month. The debit side shows the sums drawn and their dates, the column of products gives the number of days that one dollar is on interest. The balances show the sum of money in bank after each transaction. Each month's account is kept in the same manner, and at the end of the

year

the sum of the last balance and the interest is the total balance.

REM.—If a creditor were permitted to overdraw, interest on the balance would be computed on the debit side, and the difference between the two columns of products would belong to the side having the greater sum.

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is the abatement on notes not yet due, or the difference between the sum of money at a certain rate, whose amount will be equal to the face of the note when due. Thus, a note for $100 due in one year without interest when money is worth 6%, is such a sum as will amount to $100

in one year.

As $100 now is worth $106 at the end of the

year,

the present worth of money due in one year is 10% of the money due in one year. $112 at the end of two years is worth $100 now. $118 at the end of three years is worth $100 now, etc.

COR.— The ratio for discounting is a diminishing ratio having 100 for the numerator, and the denominator is 100 increased by the interest for the time and rate.

EXAMPLES. 1. What is the present worth of a note due in 1 year for $324, money worth 6%?

324 x 188 = $305.66 +

%

2. What is the present worth of a note due in 23 years for $675 at 5% ?

Ans. $600. 3. What is the present worth of a note due in 4 years for $960 at 5%?

Ans. $800. 4. What is the present worth of a note due in 15 months for $445 at 9%?

Ans. $400. 5. What is the present worth of a note due in 9 months for $721 at 4%?

Ans. $700. 6. What is the present worth of a note due in 13 months for $678 at 12%?

Ans. $600.

EXCHANGE.

Exchange is the system by which payments are made at a distant place by means of Bills of Exchange or Drafts.

In a Bill of Exchange or draft, the person giving it or signing it is called the Drawer or Maker; the one to whom it is addressed is the Drawee, and the person to whom it is ordered to be paid is the Payee.

The person in possession of the draft is the Holder, and if he sells it he must endorse it, which makes him responsible for the payment, unless otherwise specified.

Exchange between the different cities of our own country is Domestic, and that with a foreign country is called Foreign Exchange.

Exchange may be direct or circuitous; the latter is sometimes found to be advantageous.

DOMESTIC EXCHANGE.

PROBLEM.

To find the cost of a draft on Philadelphia or New York, or any distant city, when at a premium and when at a discount; thus, if the premium is 1%, the draft will cost 184 of its face, which is the sum to be paid ; when at a discount of 1%, it will cost 10% of its face.

EXAMPLES.

1. What is the cost of a draft on Philadelphia for $3024, at 1% premium ?

1gøy
$Ø24 x = :1 = $3039.12.

100

15.12

2. What is the cost of a draft on New Orleans for $5000, at 1% discount?

1% of $5000 $25.
$5000
25

$4975.

3. What will this draft cost if drawn at thirty days, interest at 6%? 3 days grace must be allowed.

11 + =
+

= rate per cent;
5000 x

= $52.50. The interest and discount must be reckoned on the face.

$5000 $52.50 = $4947.50.

4. My agent had in his possession $3288.60, which I directed him to remit; the draft received was $3240; what was the rate of exchange?

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