1. In what respect is the form of note at the foot of page 196 different from the one on page 194? What is the face? Who is the maker? Who the payee? What is the rate of interest? How much money will Mr. Collier receive April 4?

2. Should the words "with interest" be included in the note, with no rate of interest given, the legal rate in the state where the note was made is paid. What is the legal rate in your state?

V. THE SECURED NOTE

Often a maker of a note is required to deposit with the payee certain property of value, such as stocks, bonds, or a mortgage1 on real estate, as security for the payment of the sum named in the note. This property, known as collateral security, must be of sufficient value to cover fully the amount to be paid. A special form of note, called a collateral note, is used, in which the property is described.

VI. PROBLEMS

[Without pencil.]

1. Under what conditions should money be borrowed?

2. What is the danger in borrowing money to be used merely for pleasure?

3. Would a farmer be justified in borrowing money needed to gather his crops? Why?

4. What is a promissory note? Who is the maker? Who is the payee? What is the face?

5. In what respects is a promissory note like a bank check? In what respects is it different?

6. How can a note be made negotiable?

7. State the difference in wording between a time note and a demand note; between an interest-bearing note and a non-interestbearing note.

1 See Definitions, at the back of the book.

8. Under what conditions should a person loan money?

9. Why do many business men make it a rule to refuse all requests to indorse notes as a guarantee?

10. Apply the following proverb to borrowing and loaning money: "A good name is to be chosen rather than great riches."

In computing interest on promissory notes, custom varies. In solving the following problems, unless the local custom is different, count 12 months of 30 days each, or 360 days, to a year. Count a term of 3 months, as 12 or of a year, a term of 45 days as of a year, and a term from May 3 to July 8 as 36% of a year. In computing the interest on notes banks usually find the exact number of days between the date of the note and the date of maturity.

45

(1) What amount is due at the end of 6 months on a note for $600 with interest at 5%? (2) On a note for $300 dated March 2 and maturing June 21, with interest at 6%?

16. E. A. Thurston borrows $2000 on April 7 and returns the money with interest at 5% on Aug. 15 of the same year. Find the amount that was due.

17. Find the amount due on a loan of $650 made Sept. 12 and returned with interest at 6% on Dec. 4 of the same year.

27. Borrowing from a Bank

I. DISCOUNT ON DATE OF NOTE

Banks often lend money on promissory notes. A man wishing to borrow money will either take a promissory note payable to himself and ask a bank to lend him money on it, or he will write a promissory note making the bank the payee. In either case, if the man signing the note is known to be reliable, the bank will take the note, charge interest in advance on the loan, and later collect the amount of the note. The interest paid in advance on a loan secured by a promissory note is called bank discount; the amount paid on the note after deducting the bank discount is called the net proceeds.

What are the net proceeds on a 90-day note for $500 discounted at 6% on the date of the note.

1. On a note for $200, payable in 3 months, discounted at 7%. 2. On a note for $800, payable in 4 months, discounted at 6%. 3. On a note for $1200, payable in 6 months, discounted at 5%. 4. On a note for $2400, payable in 90 days, discounted at 6%. 5. On a note for $360, payable in 60 days, discounted at 7%. 6. On a note for $400, dated June 1, payable Sept. 1, discounted June 1, at 6%.

7. On a note for $3000, dated July 15, payable Nov. 15, discounted July 15, at 7%.

8. A. W. Lang gives me a note for $400 due in 3 months' time. On the date of the making of the note, I take it to a bank where it is discounted at 6%. How much money do I receive?

*9. James Patterson wished to make a payment of $460 on a farm. For what sum must he write a note to borrow the money for 1 year from a bank which charges 8% discount?

*10. For what sum must a note be drawn for 60 days to obtain $495 at a bank, when discounted at 6%?

II. DISCOUNT AFTER THE DATE OF NOTE

Mathew Hale receives a note for $500 dated July 18 and made payable in 3 months. On what date does the note mature?

In finding the date of maturity when the time is given in months, reckon in calendar months; when given in days count the actual number of days.

A 3-months note dated July 18 is due October 18.
A 90-day note dated July 18 is due October 16.

On August 5, Mathew Hale presents the note to a bank for discount. How much does he receive if the bank discounts the note at 6%?

The term of discount in this case extends from August 5 to October 18. From August 5 to October 18, the time is 74 days;

In reckoning the term of discount, count the time from the date of discount to the date on which the note matures. In computing the time, use the method illustrated in the solution of the problem above. Cancel when possible to shorten the work.

Find the date of maturity:

1. Of a 30-day note dated July 5.

2. Of a 3-months note dated July 5.

3. Of a note for 20 days, dated Feb. 21, 1920.

4. Of a 6-months note dated Sept. 10, 1920.

[Without pencil.]

[With pencil.]

5. A note for $1000 due in 3 mo. is dated March 1, 1920, and discounted at 6% on May 15 of the same year. How many days were there from the date of discount to the date of maturity? Find the discount.

Find the proceeds of the following notes (allow 29 days for February in leap year):

1. E. A. Thurston gives H. H. Keller a 6-months note for $2000, promising to pay 5% interest. At the date of maturity what sum is due on the note?

H. H. Keller has the note discounted at 6% on the date that it is made. How much does he receive?

On an interest-bearing note the discount is computed on the face of the note plus the interest.

2. Find the net proceeds on a 90-day note for $3000 bearing interest at 5% and discounted at 6% on the date that it was made.