(3) By indirect return through Madrid. 25000 Fr. invested in Madrid bills at 5.15 would purchase 4854-37 Piastres. Brokerage 1 p.m. 4.85 4849-52 Piastres. 4849-52 Spanish Dollars sold in London at 491 will purchase £1000.213 Brokerage 1 p.m. 1.000 Commission p.c. 1.250 (Madrid bill) English stamp (p.m.) Examples for practice are given under the principal countries. The above Example is proposed for solution in the Modern Cambist but the method adopted here is slightly more rigorous than in the example actually worked out in that valuable work. 16. Compound Arbitrations. The rate of exchange between two places produced by remittances through an intervening place in any other than direct paper of that place is called a compound arbitrated rate. These compound arbitrations are called circuitous when more than three places intervene or when the proceeds of the bills return to the original place after passing through two or more places. The increased charges are the great restrictions upon these operations, and even compound arbitrations (much less circuitous operations) are rarely used. The chain rule solves the question as before, but great attention to the various charges is necessary. COMPOUND ARBITRATIONS. 251 Example 1. I buy in London a sight bill upon Amsterdam at 12·2, sending it to Amsterdam, where the proceeds buy 3 mos. Hamburg bills at 58.75. These are forwarded to Paris and sold at 123. What is the rate between London and Paris? Example 2. I buy in London a 3 mos. Hamburg bill at 20-50, and it is sold in Amsterdam at 58-75. The proceeds are used to buy 3 days' sight bills on Genoa at 42.25 Florins per 100 Lire, and these are sold in Paris at 11 p.c. discount-find rate between London and Paris. Examples are given under certain countries. The rates must always be corrected for brokerages, commissions, stamps-strictly also postage cannot be neglected. Example 3. Simple Circuit. I buy £1000's worth of Hamburg bills at 20-50, and send them to be sold in Amsterdam at 59. In return I receive bills of 2 mos'. date at 11.90. Is the operation profitable if the time is 67 days and bank interest available 5 p.c.? Dutch stamp p.m. English stampp.m. Commission p.c. London brokerage 1 p.m. Amsterdam p.m. £1000 will buy bills on Hamburg at 20-50 to amount of 20500.00 M. Less brokerage 1 p.m. 20.50 20479-50 M. 12156.66 Fl. will buy bills on London at 11.90 to amount of 1022-569 £ Less commission p.c. 1.278 These bills will be cashed in London for £1020-524 Less brokerage 1 p.m. = 1.021 Discount 2 mos. 3 p.c.=5.103 English stampp.m. =510 6.634 £1013.890 Now interest on £1000 for 67 days at 5 p.c.=£9.178. £1009.178 2.045 1020-524 £ £4.712 (14/3) EXAMPLES. (Consult the countries for the charges, Section X.) 1. Bought in London, £1000 Paris bills, 3 mos. 25:32, transmitted to Hamburg to be sold at 83. In return, bills of 3 mos. date at 20:53 are sent. What is the profit if time is 40 days and bank interest be 2 p.c.? 2. Bought in Paris, 20000 francs London bills, 3 mos. 25·13, transmitted to Amsterdam to be sold at 12.06. In return, bills of 2 mos'. date at 47·61 are sent to Paris. What is profit if time is 20 days and rate of interest available 3 p.c.? 3. Bought in Berlin 25000 marks Russian bills, 3 mos. 217, transmitted to London to be sold at 241. In return, bills of 3 mos. at 20:52 are sent to Berlin. What is profit if time is 50 days and rate of interest available 4 p.c.? SPECULATIVE CIRCUITS. Example 4. Circuitous Arbitration. 253 I buy 3 mos. bills upon Hamburg at 20-50 and sell them in Amsterdam at 58-75. The proceeds are invested in 3 days' sight bills upon Genoa at 42 to be sent to Paris and sold at 11 p.c. discountthe proceeds being laid out in buying 3 mos. bills upon Madrid at 5 Francs per Peso. These bills are sent to me in London and sold here at 48d. per Peso. What gain or loss p.c. arises? (Tate.) .. Net profit is about p.c. with postage deducted. The routine upon £1000 is shown thus: £1000 will buy bills upon Hamburg at 20-50 to 20479-50 M. will sell in Amsterdam at 58.75 for 12031.71 Fl. Commission p.c. 15.04 (Hamburg bill) Dutch stamp p.m. 4.21 12000-43 Fl. will buy bills on Genoa at 42 to 31.28 12000 43 Fl. 28508-16 Lire will sell in Paris at 11 p.c. disct. for 25372-26 Francs. Commission p.c. 31.72 Brokerage 1 p.m. 25.37 (Genoa bill) French stamp p.m. 6.34 25308.83 Francs will buy bills on Madrid at 500 to amount of Commission p.c. 6.33 Brokerage 1 p.m. 5.06 5050-37 Dollars will sell in London at 48d. per 63.43 25308 83 Francs. 5061-76 Dollars. 11.39 5050 37 Dollars. Bank of England notes are legal tender so long as the Bank pay them in gold, but no change need be given. Bank of England notes are not legal tender at the Bank or its branches, where sovereigns may be demanded. Private Bank-notes are not legal tender-in case of failure of the issuer the receiver cannot recover-in case of forgery the receiver can recover. Foreign Bank-notes should be sold through a broker as foreign bills. The "stopping" of bank-notes does not give a bank the right to refuse payment to the presenter if his replies (as to how he got possession of the note) are satisfactory. They can only inform the loser of the circumstances under which it was paid. |