$2816.80 Jan. 1, 1861. If he could get a discount of 10 per cent. for present payment, how much would he gain by borrowing the sum at 7 per cent., and how much must he borrow? 76+ 6. What is the difference between the interest and the discount of $576, due 1 yr. 4 mo. hence, at 6 per cent.? 3415 7. A merchant holds two notes against a customer, one for $243.16, due May 6, 1861, and the other for $178.64, due Sept. 25, 1861; how much ready money would cancel both the notes Oct. 11, 1860, discounting at the rate of 7 %? 01.29 8. A speculator bought 120 bales of cotton, each bale containing 488 pounds, at 9 cents a pound, and gave a note at 9 months at 8 per cent., for the amount. He immediately sold the cotton for $6441.60 cash, and paid his note; how much did he gain? 9. Which is the more advantageous, to buy flour at $6.25 a barrel on 6 months, or at $6.50 a barrel on 9 months, money being worth 8 %?/23 ap 10. How much may be gained by hiring money at 5 % to pay a debt of $6400, due 8 months hence, allowing the present worth of this debt to be reckoned by deducting 5% discount? BANKING. Ans. $6.87+. 558. A Bank is a corporation chartered by law for the purpose of receiving and loaning money, and furnishing a paper circulation. 559. A Promissory Note is a written or printed engagement to pay a certain sum either on demand or at a specified time. 560. Bank Notes, or Bank Bills, are the notes made and issued by banks to circulate as money. They are payable in specie at the banks. NOTE. A bank which issues notes to circulate as money is called a bank of issue; one which lends money, a bank of discount; and one which takes charge of money belonging to other parties, a bank of deposit. Some banks pertorin two and some all these duties. 561. The Maker or Drawer of a note is the person by whom the note is signed; 562. The Payee is the person to whose order the note is made payable; and 563. The Holder is the owner. 564 A Negotiable Note is one which may be bought and sold, or negotiated. It is made payable to the bearer or to the order of the payee. 565. Indorsing a note by a payee or holder is the act of writing his name on its back. NOTES.-1. If a note is payable to the bearer, it may be negotiated without indorsement. 2. An indorsement makes the indorser liable for the payment of a note, if the maker fails to pay it when it is due. 3. A note should contain the words "value received," and the sum for which it is given should be written out in words. 566. The Face of a note is the sum made payable by the note. 567. Days of Grace are the three days usually allowed by law for the payment of a note after the expiration of the time specified in the note. 568. The Maturity of a note is the expiration of the days of grace; a note is due at maturity. NOTE. No grace is allowed on notes payable "on demand," without grace. In some States no grace is allowed on notes, and their maturity is the expiration of the time mentioned in them. 569. Notes may contain a promise of interest, which will be reckoned from the date of the note, unless some other time be specified. NOTE.-A note is on interest from the day it is due, even though no mention be made of interest in the note. 570. A Notary, or Notary-Public, is an officer authorized by law to attest documents or writings of any and to make them authentic. 571. A Protest is a formal declaration in writing, made by a Notar-Public, at the request of the holder of a note, notifying he maker and the indorsers of its non-payment. NOTES.-1. The failure to protest a note on the third day of grace releases the indorsers from all obligation to pay it. 2. If the third day of grace or the maturity of a note occurs on Sunday or a holiday, it must be paid on the day previous. 572. Bank Discount is an allowance made to a bank for the payment of a note before it becomes due. 573. The Proceeds of a note is the sum received for it when discounted, and is equal to the face of the note less the discount. 574. The transaction of borrowing money at banks is conducted in accordance with the following custom: The borrower presents a note, either made or indorsed by himself, payable at a specified time, and receives for it a sum equal to the face; less the interest for the time the note has to run. The amount thus withheld by the bank is in consideration of advancing money on the note prior to its maturity. NOTES.-1. A note for discount at bank must be made payable to the order of some person, by whom it must be indorsed. 2. The business of buying or discounting notes is chiefly carried on by banks and brokers. 575. The law of custom at banks makes the bank discount of a note equal to the simple interest at the legal rate, for the time specified in the note. As the bank always takes the interest at the time of discounting a note, bank discount is equal to simple interest paid in advance. Thus, the true discount of a note for $153, which matures in 4 months at 6 %, is $153 $3.00, and the bank discount is $153 x .02 = $3.06. Since the interest of $3, the true discount, for 4 months is $3 × .02 = $.06, we observe that the bank discount of any sum for a given time is greater than true discount by the interest on the true discount for the same time 15300 = 102 CASE I. 576. Given, the face of a note, to find the discount and the proceeds. RULE. I. Compute the interest on the face of the note for three days more than the specified time; the result will be the discount. II. Subtract the discount from the face of the note; the remainder will be the proceeds. NOTES.1. When a note is on interest, payable at a future specified time, the amount is the face of the note, or the sum made payable, and must be made the basis of discount. 2. To indicate the maturity of a note or draft, a vertical line (I) is used, with the day at which the note is nominally due on the left, and the date of maturity on the right; thus, Jan. 7 | 10. EXAMPLES FOR PRACTICE. 1. What is the bank discount, and what are the proceeds of a note for $1487 due in 30 days at 6 per cent.? Ans. $Discount, 8.17; Proceeds, $1478.83. 2. What are the proceeds of a note for $384.50 at 90 days, if discounted at the New York Bank? 377,54+ 3. Wishing to borrow $1000 of a Southern bank that is discounting paper at 8 per cent., I give my note for $975, payable in 60 days; how much more will make up the required amount ?3'6 4. A man sold his farm containing 195 A. 2 R. 25 P. for $27.50 an acre, and took a note payable in 4 mo. 15 da. at 7 % interest. Wishing the money for immediate use, he got the note discounted at a bank; how much did he receive? Ans. $5236.169. 5. Find the day of maturity, the term of discount, and the proceeds of the following notes: $1962,45% 100° DETROIT, July 26, 1860. 6. Four months after date I promise to pay to the order of James Gillis one thousand nine hundred sixty-two and 45 dollars at the Exchange Bank, for value received. Discounted Aug. 26, at 7%. 100 95 Ans. Due Nov. 26 | 29; term of disct., 3 mo. 3 da.; proceeds, $1926.96.2.0 $1066,75. BALTIMORE, April 19, 1859. 7. Ninety days after date we promise to pay to the order of King & Dodge one thousand sixty-six and 75 dollars at the Citizens' Bank, for value received. CASE & SONS. Discounted May 8, at 6 %. Ans. Due July 18 | 21; term of discount, 74 da.; proceeds, $1053.59. $784 72 100 MOBILE, June 20, 1861. 8. Two months after date for value received I promise to pay George Thatcher or order seven hundred eighty-four and 72 dol lars at the Traders' Bank. Discounted July 5, at 8 %: 100 WM. HAMILTON. $1845,500. CHICAGO, Jan. 31, 1862. 9. One month after date we jointly and severally agree to pay to W. H. Willis, or order, one thousand eight hundred forty-five and 50 dollars at the Marine Bank. 100 Discounted Jan. 31, at 2 % a month. PAYSON & WILLIAMS. Ans. Due Feb. 28 | March 3; term of discount, 31 da.; proceeds, $1807.36. 10. What is the difference between the true and the bank dis count of $950, for 3 months at 7 per cent.? Ans. $.205, 29+ 11. What is the difference between the true and the bank dis count of $1375.50, for 60 days at 6 per cent.?/ CASE II. 577. Given, the proceeds of a note, to find the face. 1. For what sum must I draw my note at 4 months, interest 6 %, that the proceeds when discounted in bank shall be $750? the proceeds of as many dollars as $.9795 is contained times in $750. Dividing, we obtain the required result. Hence the RULE. Divide the proceeds by the proceeds of $1 for the time and rate mentioned; the quotient will be the face of the note. EXAMPLES FOR PRACTICE. 1. What is the face of a note at 60 days, the proceeds of which, when discounted at bank at 6 %, are $1275? Ans. $1288.53. 2. If a merchant wishes to draw $5000 at bank, for what sum must he give his note at 90 days, discounting at 6 per cent.? Ans. $5078.72. 3. The avails of a note having 3 months to run, discounted at a bank at 7 %, were $276.84; what was the face of the note ?? |
