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3. A ship was insured for a certain voyage to the amount of $27500. The premium was 54 per cent, and the policy cost $1.50. What was the cost of insurance ?
4. I had my house insured for $3000, for which I paid a premium of 5 per cent, and $.75 for the policy. 11 months afterwards, the house was burned; and, 1 month after the fire, the insurance company paid me the insurance. How much did I really save by the insurance ?
5. Aug. 4, 1856, I bought a lot of cloth for $5000, and shipped it to Buenos Ayres. Aug. 7, I got it insured for its cost, paying 45 per cent for the insurance, and $1.50 for the policy. Sept. 15, I received intelligence that the vessel was lost at sea. Oct. 15, the insurance company paid me the insurance. What was my real loss, money being worth 8 per cent per year?
6. I had my house insured for $2500 for 7 years, paying a premium of 6 per cent, and $1 for the policy. The house was not burned. Allowing that money was worth 6 per cent a year compound interest, how much had the insurance cost me when the policy expired? How much should I have gained by the insurance had the house been burned, and the insurance paid me at the end of the 7 years ?
128. Orders, Drafts, and Bills of Exchange. (a.) A Draft or an ORDER is a business paper, requesting one person to pay to another a specified sum of money on account of a third person, who is always the signer of the order.
ILLUSTRATION. $300. Providence, Jan. 1,1858.
Please pay to the order of Dexter S. Stone, three hundred dollars, and charge the same to me
Charles B. Hawkins. To E. Wheelock, fr.
140 Westminster St.
(b.) The preceding is an ORDER OG DRAFT drawn by Charles B. Hawkins on E. Wheelock, Jr., IN FAVOR OF Dexter S. Stone.
(c.) The signer of the order is the DRAWER. The one to whom it is addressed is the DRAWEE; and the one in whose favor it is drawn, or the one who becomes its legal owner, is the HOLDER.
(d.) The draft may be made payable on time, as, “Thirty days after date," or, “At so many days sight," i. e. in so many days after the holder presents it to the drawee for ACCEPTANCE.
(e.) A draft is ACCEPTED when the drawee has written the word “ ACCEPTED” and his name across the face of it, to indicate that he will pay it when due. An accepted draft is, to all intents and purposes, a promissory note against the party accepting it.
(f.) If the drawee refuses either to accept a draft, or to pay it when due, it may be protested in the same manner as a promissory note, and the holder may demand payment of the drawer or of any indorser.
(g.) Drafts payable in a different place from that in which they are dated, are called BILLS OF EXCHANGE. If payable in the same country, they are called Inland or DOMESTIC BILLs; if payable in a foreign country, they are called Foreign Bills.
(h.) To guard against loss in the transportation of foreign bills of exchange, it is customary to prepare two or three (usually three) copies, and to send them by different vessels. These bills constitute a Set of EXCHANGE, and are called First, Second, and THIRD of exchange. They are so worded that the payment of one renders the others void.
(i.) A bill of exchange gives to the holder funds in the country on which it is drawn, and thus saves the expense and risk of transporting specie for the making of purchases or the payment of debts.
ILLUSTRATION. - The bill under k gives to Williams & Grover £2000 in London.
(j.) Such bills are usually sold by the drawer to the party in whose favor they are drawn, and may bring more or less than their nominal or par value. If they bring more, they are sold at a PREMIUM; if less, they are sold at a DISCOUNT.
(k.) FORM OF A Bill of EXCHANGE.
New York, Jan. 1,1858. Exchange for £2000.
Thirty days after sight of this first of exchange second and third unpaid), pay to the order of Williams Go Grover two thousand pounds, and charge the same to our account.
G. F. Austin & Co. To Geo. Peabody og Co.
London. (1.) A pound sterling in exchange is reckoned at of a dollar,
or $4.449, though the real value of the sovereign, which represents it, varies from $4.83 to $4.86 (see 17, b). A dollar in exchange, therefore, is really worth about $1.09; and exchange on England is really at par when $1.00 sells for about $1.09. It is at a premium when it sells for more, and at a discount when it sells for less, than $1.09.
ILLUSTRATION. If a Bill of Exchange on England for £1000 be purchased at 108, it would cost $4799.999, as follows: 1000 x $44 = $4444.444 = nominal value.
355.555 = 8 per cent nominal premium.
$4799.999 = total cost. If the value of the sovereign was $4.85, the above bill would bring in England 1000 X $4.85 = $4850; from which it appears that this sale, though made nominally at a premium, was really at a discount.
1. What would a bill of exchange on England for £1000 cost at 1081?
377.777 = 81 per cent premium.
2. What will a bill of exchange on England'or £1500 cost at 1097? 3. What will a bill of exchango on London for £1800 cost at 1083?
4. The sovereign being worth $4.83, were the last three bills really sold at a premium or a discount?
5. What is the exact cost of a pound of exchange bought at 108/? 6. What is the exact cost of a pound of exchange bought at 109?
7. What will a bill of exchange on France for 6400 francs cost at 1 per cent discount, the franc being reckoned at $.186 ?
8. What will a bill of exchange on Havana for $5475 cost at 24 per cent premium ?
(a.) Money invested in any property designed to yield an income is called STOCK.
ILLUSTRATIONS. — Money invested in business is called STOCK IN TRADE; money invested in government securities, bonds, etc. is called GOVERNMENT STOCK.
(b.) The CAPITAL STOCK of an incorporated company is the money paid in by its members for the general purposes for which the company was formed. It is divided into equal parts called SHARES. Any person owning one or more of these shares is a STOCKHOLDER, or MEMBER OF THE CORPORATION. Stocks is a general term applied to the shares themselves, which may be bought and sold like any other property.
(c.) The first or original value of the shares of any corporation, i. e. the value at which they are rated in estimating its capital stock, is called their NOMINAL VALUE, or their Par Value, and is always the same.
(d.) The price which they will bring, if exposed for sale, is their True or REAL Value, and is different at different times.
(e.) If the real value equals the par value, the stocks are At Par; if it be greater, they are ABOVE Par, and sell at a PREMIUM or ADVANCE ; if it be less, they are Below Par, and sell at a DISCOUNT.
(f.) The profits accruing to the corporation, if any, are at intervals distributed among the members, in proportion to the number of shares each holds, and are then called DIVIDENDS. The dividends are usually reckoned at a certain per cent of the par value of the shares.
1. What will 8 shares of Suffolk Bank stock cost at an advance of 7 per cent, the par value being $100 per share ? SOLUTION. —
$800 = par value of 8 shares.
56 = 7 per cent premium.
$856 = real value, or required cost. 2. How much will 19 shares of railroad stock cost at a discount of 4 per cent, the par value being $50 per share ? SOLUTION. —
$950 = par value of 19 shares.
38 = 4 per cent discount.
$912 = real value, or required cost. 3. How much will 14 shares City Bank stock cost at a premium of 11 per cent, the par value being $100 per share ?
4. What will 23 shares of railroad stock cost at a discount of 19 per cent, the par value being $100 per share ?
5. A broker bought 11 shares of stock at a premium of 3 per cent. How much did they cost him, the par value being $50 per share?
6. I bought 20 shares in a mining company at 42 per cent below par, and sold them at 37 per cent below par. How much did I gain, the par value being $100 per share ?
7. How much shall I lose by buying 15 shares bank stock at a premium of 7 per cent, and selling them 4 months afterwards at a discount of 3 per cent, the par value being $100 per share, and . money being worth 6 per cent per year?
8. I bought 25 shares of Fitchburg railroad stock at 25 per cent discount, and a broker sold them for me at 16 per cent discount, charging 25 cents per share for his services. How much did I gain by the transaction, the par value of the stock being $100 per share ?