$500000.

Ex. 2.

Annapolis, Md., June 19, 1888.

On demand £promise to pay to

Find the balance which was paid on Sept. 19, '94.

Here we find the times in years, months, and days.

int. for 4 mo. 6 d., at 4%.

$5009.16 am't of 2d prin.

250. 2d payment.

$4759.16 3d prin.

552.06 int. for 2 yr. 10 mo. 24 d., at 4%.

$5311.22 am't of 3d prin.

1275. 3d and 4th payments.

$4036.22 4th prin.

161.45 int. for 1 yr., at 4%.

$4197.67 am't of 4th prin.

2000.

5th payment.

$2197.67 5th prin.

136.26 int. for 1 yr. 6 mo. 18 da., at 4%.

$2333.93 am't paid Sept. 19, '94.

In case any payment is less than the interest due at the time of such payment (as in the 3d payment of this note) a portion of the interest would become a part of the new principal and would draw interest, if we should proceed as with the 1st and 2d payments. Here compound interest is forbidden by law, and we must find the interest on the same principal until the time when the sum of the payments equals or exceeds the interest.

THE UNITED STATES RULE.*

252. Compute the amount of the principal to the time when a payment, or the sum of two or more payments, equals or exceeds the interest due.

Subtract from this amount the payment, or the sum of the payments, and proceed with the remainder as a new principal. And so on to the time of settlement.

* Vermont, New Hampshire, and Connecticut have methods of their own for computation in partial payments, but it is not advisable to consider those methods in our present study.

T

EXAMPLES CVI.

1. A Kentucky note for $3500, with interest, dated Mch. 1, '90, had the following endorsements:

Apr. 6, '90, $500.

"30, '90, $300.

May 15, '90, $800.

July 11, '90, $600.

What was paid in settlement on Aug. 22, '90 ?

2. An Arizona note for $8600, with interest, dated

July 1, '87, had the following endorsements:

Oct. 2, '87, $150.

Feb. 21, '88, $4000.

Nov. 7, '87, $1500.

What was due May 4, 1888?

3. A Louisiana note for $876, with interest, dated

Feb. 6, '86, was endorsed as follows:

Apr. 11, '86, $50.

Dec. 1, '86, $150.

June 2, '87, $300.

July 5, '87, $75.

What was paid in settlement on Jan. 1, '88?

4. A Massachusetts note for $3000, with interest at

41%, dated Jan. 1, '91, was endorsed as follows:

Mch. 7, '91, $175.

May 9, '91, $300.

Aug. 17, '93, $400.

Sept. 20, '93, $800.

Nov. 30, '94, $80.

What was paid in settlement on Dec. 5, '94?

5. An Indiana note for $2500, dated Jan. 6, '94, was

What was paid in settlement on Feb. 20, '95?

Ans. $1145.

CHAPTER XII.

EXCHANGE.

DRAFTS.

253. Suppose that Wilson & Co. of Baltimore buy of Morton & Co. of St. Paul $2500 worth of goods on 60 da. credit. When the bill is due, Morton & Co. may make a formal request for its payment. Such a request is called a Draft; Morton & Co. are said to draw on Wilson & Co. For example:

$250000 St. Paul, Minn., July 25, 1894. ~māt sight~Pay to the

The draft is sent to Wilson & Co. through a St. Paul bank which transmits it to a Baltimore bank. The latter presents the draft to Wilson & Co. for payment, and the cash is sent to Morton & Co. through the St. Paul bank.

The banks charge a small fee for their services, and the words 'with exchange' in the draft signify that the debtor must pay the fee.