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accompany his signature by a special order to pay to another person, who in his turn may transfer the title in like manner. Indorsers become separately respon

sible for the amount of the bill, in case the drawee fails to make payment. A bill made payable to the bearer is transferable without indorsement.

341. The Acceptance of a bill is the promise which the drawee makes when the bill is presented to him to pay it at maturity; this obligation is usually acknowledged by writing the word "Accepted," with his signature, across the face of the bill.

Three days of grace are usually allowed for the payment of a bill of exchange after the time specified has expired. But in New York State no grace is allowed on sight drafts.

From these definitions, the use of a bill of exchange in monetary transactions is readily perceived. If a man wishes to make a remittance to a creditor, agent, or any other person residing at a distance, instead of transporting specie, which is attended with expense and risk, or sending bank notes, which are liable to be uncurrent at a distance from the banks that issue them, he remits a bill of exchange, purchased at a bank or elsewhere, and made payable to the proper person in or near the place where he resides.

Thus a man by paying Boston funds in Boston, may put New York funds into the hands of his New York agent.

342. The Course of Exchange is the variation of the cost of sight bills from their par value, as affected by the relative conditions of trade and commercial credit at the two places between which exchange is made. It may be either at a premium or discount,

and is rated at a certain per cent on the face of the bill. Bills payable a specified time after sight are subject to discount, like notes of hand, for the term of credit given. Hence their value in the money market is affected by both the course of exchange and the discount for time.

343. FORMS OF DRAFTS AND BILLS.

A SIGHT DRAFT.

$500.

NEW YORK, March 1, 1893.

At sight, pay to the order of Harold Brown, five hundred dollars, value received, and charge to the acc't of HENRY M. LANE.

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Other drafts have the same form as the above, except that instead of the words "at sight," "6 days after sight," or "—— days after date," are used. When the time is after sight, it means after

acceptance.

£700.

SET OF EXCHANGE.

NEW YORK, Feb. 1, 1892.

At sight of this FIRST of Exchange (Second and Third of the same tenor and date unpaid), pay to the order of Samuel Monmouth, Seven Hundred Pounds Sterling, for value received, and charge the same to the account of

ROBINS, BARCLAY & Co., }

London.

H. B. CLAFLIN Co.

The above is the form of the first bill; the second requires only the change of "FIRST" into "SECOND," and instead of "Second and Third of the same tenor," etc., "First and Third." The Third Bill varies similarly.

DOMESTIC OR INLAND EXCHANGE.

344. Domestic or Inland Exchange relates to remittances made between different places in the same country.

EXAMPLES.

345. To find the cost of a draft.

$500.

SYRACUSE, May 7, 1889.

1. At sight, pay to James Clark, or order, five hundred dollars, value received, and charge the same to our account. M. SMITH & Co.

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What is the cost of the above draft, the rate of exchange being 14% premium?

OPERATION.

$500 x 1.015= $507.50, Ans.

SOLUTION. Since exchange is at 11% premium, each dollar of the draft will

cost $1.015; and to find the whole cost of the draft, we multiply its face, $500, by 1.015, and obtain $507.50, the required result.

$480.

BOSTON, June 12, 1892.

2. Thirty days after sight, pay to John Otis, or bearer, four hundred eighty dollars, value received, and charge the same to account of AMOS TRENCHARD.

TO JOHN STILES & CO., }

INDIANAPOLIS.

What is the cost of the above draft, exchange being at a premium of 3% ?

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$.9945, the cost of $1 of the draft, provided sight exchange were at par; but sight exchange being at premium, we add the rate, .03, to .9945, and obtain $1.0245, the actual cost of $1. Then, multiplying $480 by 1.0245, we obtain $ 491.76.

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RULE. I. For sight drafts. Multiply the face of the draft by 1 plus the rate when exchange is at a premium, and by 1 minus the rate when exchange is at a discount. II. For time drafts. Find the proceeds of $1 at bank discount for the specified time, at the legal rate where the draft is purchased; then add the rate of exchange when at a premium, or subtract it when at a discount, and multiply the face of the draft by this result.

3. A merchant in Cincinnati wishes to remit $1000 by draft to his agent in New York. What will the bill cost, exchange being at 3% premium? Ans. $1030.

4. What will be the cost in Rochester of a draft on Albany for $400, payable at sight, exchange being at % premium? Ans. $403.

5. A merchant in St. Louis orders goods from New York, to the amount of $530, which amount he remits by draft, exchange being at 23% premium. If he pays $20 for transportation, what will the goods cost him in St. Louis ? Ans. $564.575. 6. What will be the cost, in Boston, of a draft on Detroit for $800, payable 60 days after sight, exchange being at a premium of 2% ?

7. A man in Little Rock, Ark., purchased a draft on Lansing for $420, payable 30 days after sight. What did it cost him, the rate of exchange being 14% discount?

8. A merchant in Portland receives from his agent 320 barrels of flour, purchased in Chicago at $10 per barrel; in payment for which he remits a draft or Chicago, at 2% discount. The transportation of his four cost $312. What must he sell it for per barrel to gain $400 ?

346. To find the face of a draft which a given sum will purchase.

1. A man in Indiana paid $369.72 for a draft on Detroit, drawn at 30 days. What was the face of the premium?

draft, exchange being at 31%

OPERATION.

$369.72 ÷ $1.027 = $360, Ans.

SOLUTION. We find, 345, that a draft for $1 will cost $1.027; hence the

draft that will cost $369.72 must be for as many dollars as $1.027 is contained times in $369.72; dividing, we obtain $360, the required result.

RULE.

·Divide the given cost by the cost of a draft for $1, at the given rate of exchange; the quotient will be the face of the required draft.

2. What draft may be purchased for $243.60, exchange being at 14% premium ? Ans. $240. 3. An agent in Pittsburg holding $282.66, due his employer in Newport, R. I., is directed to make the remittance by draft, drawn at 60 days. What will be the face of the draft, exchange being at 2% premium ?

Ans. $280.

4. What draft may be purchased for $79.20, exchange being at 1% discount? Ans. $80.

5. A Louisville manufacturer is informed by his agent in Portland that $3600 is due him on the sale of some property. He instructs the agent to remit by a draft payable in 60 days after sight, exchange being at % premium. The agent, by mistake, remits a sight draft, which, when received in Louisville, is accepted, and paid after the expiration of the three days of grace. If the manufacturer immediately puts this money at interest at the legal rate, will he gain or lose by the blunder of his agent? Ans. He will lose $1.90.

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