5. A draft on Philadelphia cost £125 in Birmingham, Eng., exchange selling for 4.855; required the face of the draft. Ans. $606.875. 6. An agent in Boston having $7536.30 due his employer in England, is directed to remit by a bill on Liverpool; what is the face of the bill which he can purchase for this money, exchange selling at 4.914? Ans. £1534 2s. 1d. + 7. A merchant in Cincinnati has 9087 guilders due him in Amsterdam, and requests the remittance by draft. What sum will he receive, exchange on U. S. in Amsterdam selling at 2.41 guilders for $1? 3770.746 8. A trader in London wishes to invest £2500 in merchandise in Lisbon; if he remits to his correspondent at Lisbon a bill purchased for this sum, at the rate of 4.51 milreis to the pound sterling, what sum in the currency of Portugal will the agent receive? Ans. 11275 milreis. 9. A draft on Dublin for £360 cost $1736.10; what was the course of exchange? Ans. 4.821. 10. A merchant in Baltimore having received an importation of Madeira wine invoiced at 1500 milreis, allows his correspondent in Madeira to draw on him for the sum necessary to cover the cost, exchange on the United States being in Madeira 931 reis to the dollar; how much would the merchant have saved by remitting a draft on Madeira, purchased at $1.065 per milreis? Ans. $12.80+. 11. An importer received a quantity of Leghorn hats, invoiced at 25256.80 lire, which was paid in U. S. gold coin, exported at a cost of 3% for transportation and insurance, the price of fine gold in Leghorn being 131 lire per ounce Troy. How much more would the goods have cost in store, had payment been made by draft on Leghorn, purchased at the rate of $.198 per lira? Ans. $895.75 +. NOTE.-In U. S. gold coinage, $10 contains 258 × .9=232.2 grains of fine gold (603). 12. When silver is worth in England 61d. per oz. fine, what sum of money in U. S. trade-dollars is equal to £1 sterling? Ans. $4.996+. 13. What is the course of exchange on Berlin when $858.85 is paid for 890 marks? 607. Arbitration of Exchange is the process of comp exchange between two places by means of one or more interme exchanges. NOTES.-When there is only one intermediate exchange, the process is called Arbitration; when there are two or more intermediate exchanges, the process i Compound Arbitration. 2. The arbitrated price is generally either greater or less than the price of di changes; and the object of arbitration is to ascertain the best route for making or remittances. 608. There are always three methods of receiving money a place, or of transmitting money to a place, by means of in exchange through one intervening place. Thus, If A is to receive money from C through B, 1st. A may draw on B, and B draw on C; 2d. A may draw on B, and C remit to B; 3d. B may draw on C, and remit to A. If A is to transmit money to C through B, 1st. A may remit to B, and B remit to C; 2d. A may remit to B, and C draw on B; 3d. B may draw on A, and remit to C. 1. A man in Albany, N. Y., paid a demand in Paris of 54 by remitting to Amsterdam at the rate of $.41 per guild thence to Paris at the rate of 2.15 francs per guilder. Federal money was required? How Or, since the course of exchange between Amsterdam and Paris gives 1 guilder 2.15 francs, and the course between Albany and Amsterdam gives $.414-1 guilder, we multiply the 5400 francs by .415 and divide by 2.15, using the vertical line and cancellation, and obtain $1042.32+, as before. NOTE.-In the first statement, the rates of exchange are so arranged that the same unit of currency shall stand on opposite sides in each two consecutive equations, in order that these factors may all be canceled. 2. A resident of Naples, having a bequest of $8720 made him in Boston, orders the remittance to be made to his agent in London, who remits the proceeds to Naples, reserving his commission of % on the draft sent. If the course of exchange on London is $4.875 in Boston, and the rate between London and Naples is 25.53 lire to the pound sterling, how much does the man realize from his bequest? 3. A merchant in Chicago directs his agent in Albany to draw upon Baltimore at 1% discount, for $1200 due from the sales of produce; he then draws upon the Albany agent, at 2% premium, for the proceeds, after allowing the agent to reserve % for his commission. What sum does the merchant realize from his produce? OPERATION. (?) C = 1200 B. 100 B = 99 A. 100 A = 102 C. 1.995 ANALYSIS.-According to the given rates of exchange, 100 dollars in Baltimore equal 99 dollars in Albany; and 100 dollars in Albany equal 102 dollars in Chicago; and since the unit of currency is the same in each place, being $1, we (?)= $1205.70, Ans. represent its exchange value in each town by the initial letter, and make the statement as in the other examples. Then, since the agent is to reserve % commission from the avails of his draft, we place 1-.005.995 on the right as a multiplier, and obtain by cancellation (?) = $1205.70, the answer. From these principles and illustrations we have the following RULE. I. Represent the required sum by (?), with the proper unit of currency affixed, and place it equal to the given sum on the right. II. Arrange the given rates of exchange so that in any two consecutive equations the same unit of currency shall stand on opposite sides. III. When there is commission for drawing, place 1 minus the rate on the left if the cost of exchange is required, and on the right if proceeds are required; and when there is commission for remitting, place 1 plus the rate on the right if cost is required, and on the left if proceeds are required. IV. Divide the product of the numbers on the right by the product of the numbers on the left, cancelling equal factors; the result will be the answer. NOTES.-1. Commission for drawing is commission on the sale of a draft; commission for remitting is commission on the purchase price of a draft. 2. The above method is sometimes called the Chain Rule, or Conjoined Proportion. EXAMPLES FOR PRACTICE. 1. A gentleman in Philadelphia wishes to deposit $5000 in a bank at Stockholm, by remitting to Liverpool and thence to Stockholm; if the course of exchange on Liverpool is 4.91 in Philadelphia, and the course between Liverpool and Stockholm is 181 crowns to £1, how much money will the man have in bank at Stockholm, allowing the agent at Liverpool % for remitting. Ans. 18792.1 crowns. 2. When exchange at New York on Paris is 5 francs 16 centimes per $1, and at Paris on Hamburg 1.23 fr. per mark, what will be the arbitrated price in New York of 7680 marks of Hamburg? Ans. $1830.69. 3. A gentleman in Cleveland wishes to draw on New Orleans for a bank stock dividend of $750, and exchange direct on New Orleans is 14% discount; how much will he save by drawing on his agent in New York at 14% premium, allowing his agent to draw on New Orleans at 1% discount, brokerage at %? 4. A gentleman in Boston drew on Amsterdam for 6000 guilders at $.415 per guilder; how much more would he have received if he 7.94 had ordered remittance to London, and thence to New York, exchange at Amsterdam on London being 11.19 guilders per £1, and at London on New York 4.88, brokerage at 11% in London for remitting. Ans. $94.31+. 5. If at Philadelphia exchange on Liverpool is 4.89, and at Liverpool on Paris 24 francs 96 centimes per £1, what is the arbitrated course of exchange between Philadelphia and Paris, through Liverpool? Ans. 5.10. 6. An American resident of Amsterdam wishing to obtain funds from the U. S. to the amount of $6400, directs his agent in London to draw on the U. S. and remit the proceeds to him in a draft on Amsterdam, exchange on the U. S. being at 4.85 in London, and the course between London and Amsterdam being 18d. per guilder. If the agent charges commission at % both for drawing and remitting, how much better is this arbitration than to draw directly on the U. S. at 41 cents per guilder?/9.689. 7. A speculator in Pittsburgh, having purchased 58 shares of railroad stock in New Orleans, at 95 %, remits to his agent in New York a draft purchased at 2 % premium, with orders for the agent to remit the sum due in N. O. Now, if exchange on N. O. is at % discount in N. Y., and the agent's commission for remitting is %, how much does the stock cost in Pittsburgh? Ans. $5606.08. 8. A merchant in Boston owes 19570 francs in Paris. Which will be the more advantageous to him, to remit directly to Paris at 5.12 or through London at 4.89, buying there exchange on Paris at 25.19 fr. to £1, and paying % brokerage?/3.7 9. If in London exchange on Paris is 25.71, and in New York on Paris it is 5.15, what is the arbitrated course of exchange between New York and London? Ans. 4.987+. 10. A banker in New York remits $3000 to Liverpool, by arbitration, as follows: first to Paris at 5 francs 16 centimes per $1; thence to Hamburg at 125 francs per 100 marks; thence to Amsterdam at 1.714 marks to the guilder; thence to Liverpool at 11.82 guilders per £1 sterling. How much sterling money will he have in bank at Liverpool, and what will be his gain over direct exchange at 4.914? Proceeds in Liverpool, £610 18s. 3d. Gain by arbitration, Ans. { 10s. 9d. |
