does or does not bear interest, and the words "value received." The law assumes that no one is to be compelled to pay unless he has received what he deems an equivalent. If "value received" is omitted, the holder may have to prove that the maker of the note did actually receive value for the money promised in it. 74. A note usually specifies where it is to be paidusually at a bank. If no place is designated, the holder's place of business is understood. 75. If a note contains the words "or order," it is a negotiable note, and may pass like a bank note from one person to another. If the holder of a negotiable note wishes to dispose of it, he is required to guarantee its payment by indorsing it—that is, by writing his name across the back of the note. There are several kinds of indorsements. Thus, if the holder is John Smith, he may, on the back of the note, write John Smith. This is an indorsement in blank, and makes John Smith responsible for the payment of the note. He may write, Pay to William Jones. The note is then payable only to William Jones. If he indorses it, Pay to William Jones, or order, it is payable to William Jones, or to any one to whom William Jones may order it to be paid. He may indorse it, Pay to William Jones, or bearer, and it is payable to any person that presents it. If it be indorsed, Pay to bearer, it is payable to the person that presents it for payment. 76. A joint and several note is a note signed by two or more persons, who become collectively and individually responsible for its payment. A note is protested when the holder of it notifies the indorsers in legal form and within the time prescribed by law that the note is unpaid. Unless such protest is legally made, the indorsers of a note are not responsible for its payment. This protest must reach the indorser not later than the day when the note is payable. 126D-15 77. Some forms of notes used in actual business are given below. $250. New York, N. Y., Sept. 17, 1896. On demand I promise to pay George Camp, or order, Two Hundred and Fifty Dollars, value received. $1,000. Howard Gray. Scranton, Pa., July 5, 1898. Three months after date, for value received, I promise to pay Stephen Girard, or order, One Thousand Dollars, with interest at 5%. Charles Goldwin. $3,000. Philadelphia, Pa., July 5, 1898. Six months after date, we, or either of us, will pay to George Owen, Three Thousand Dollars, value received, with interest at 6%. George Kirwin. Henry Potter. Erastus Kirby. Payable at the First National Bank. 78. In some states, three days of grace are allowed before a note must be paid. If a bank in a state where grace is allowed discounts a note, interest is charged for days of grace. EXAMPLES FOR PRACTICE. 79. Solve the following examples: 1. Write a negotiable demand note for $600, with interest at 6%, and make Brown, Jones & Co. the payee. 2. Write a non-negotiable note for $4,000, with interest at 5%, payable in 30 days, yourself being the maker and Howard Crosby the payee. 3. How much will pay the following note when due, without grace? $57510% New York, N. Y., Sept. 19, 1898. Sixty days after date, for value received, I promise to pay Ralph Newton, or order, Five Hundred Seventy-Five and 50 Dollars, with interest at 41%. 100 Henry Miles. Ans. $579.82. BANK DISCOUNT. 80. Bank discount is the charge made by a bank for paying a note or other obligation before it is due. This charge is the interest on the amount of the obligation from the time it is discounted until its maturity. This interest is subtracted from the face of the obligation, and its holder receives for it the remainder, which is called the proceeds. Hence, bank discount is inequitable, since interest is charged, not only upon the sum actually paid for the obligation, but also upon the discount. 81. In states where days of grace are allowed, bank discount is calculated for 3 days more than the time specified in the note. Thus, if a 60-day note for $1,000 is discounted at a bank, the interest of $1,000 is found for 63 days, and is subtracted from $1,000. If the rate of discount is 6%, the holder will receive as proceeds $1,000 - $10.50 = $989.50. 82. It is evident that the owner of the note should receive for it the true present worth of $1,000 payable in 63 days, or $989.61. The bank gives him only $989.50, or 11 cents less than he should get. When it is considered that the sums annually discounted by most banks amount to millions of dollars, it will be seen how much of their gain is unearned. 83. The maturity of a note, when grace is allowed, is on the last day of grace. The time of maturity is generally indicated on such notes. Thus, Mar. 7/10, written on a note means that it matures nominally on March 7, and legally on March 10. The term of discount is the time from the discounting of the note to its maturity. 84. In the case of an interest-bearing note, the sum discounted is the amount of the note at maturity calculated from the time of discounting it. 85. Banks usually require that a discounted note shall be payable at the bank that discounted it, and they rarely discount notes having more than 90 days to run. 86. To find the time when a note matures, the term of discount, the discount, and the proceeds. EXAMPLE.-Find (a) the discount, and (b) the proceeds of the following note: 60 $484100 Newark, N. J., Oct. 4, 1907. Dol Sixty days after date, for value received, I promise to pay William Hall, or order, Four Hundred Eighty-Four and lars, at the Ninth National Bank. Henry Parshall. = $181.05. Ans. EXPLANATION.-Sixty days after Oct. 4 is Dec. 3, the date of legal maturity. From the time of discount, Oct. 20, to Dec. 3 is 44 days, for which the interest at 6% is $3.55. Subtracting the discount, $3.55, from the face of the note, $484.60, gives $481.05, the proceeds. EXAMPLE. Find (a) the discount and (b) the proceeds of the following note, allowing for days of grace. $1,060. Chicago, Ill., August 6, 1907. For value received, I promise to pay, three months after date, to Ernest Hazard, or order, One Thousand Sixty Dollars, with interest at 8%. Discounted, Sept. 1, 1907, at 6%. SOLUTION. Emil Reeves. NOTE. In nearly all states days of grace have been abolished, but they are still allowed in some states. 87. Rule.-I. If the note bears interest, find its amount at the time of maturity. II. Find the interest on the face of the note at the given rate of discount, or, if it is an interest-bearing note, on the amount of the note at the date of legal maturity at the given rate of interest, and the result will be the bank discount. III. Subtract the bank discount from the face of the note, or from its amount at maturity, and the remainder will be the proceeds. EXAMPLES FOR PRACTICE. 88. Solve the following examples: 1. Find (a) the bank discount and (b) the proceeds of a note for $5,000, due in 60 days, discounted at 6%. Ans. (a) $50.00. 2. Find (a) the bank discount and (b) the proceeds of a grace note for $4,000, due in 90 days, discounted at 5%. Ans. (a) $51.67. 3. Required, (a) the bank discount and (b) the proceeds of a grace note for $7,600, due in 30 days, discounted at 8%. (a) $55.73. Ans. {(6) $7,514.27. 4. A note for $8,000 dated July 9, 1906, is discounted at 6% on Sept. 7, 1906. If it is a 90-day note, what are the proceeds? Ans. $7,960.00. 5. A grace note for $2,800 bearing interest at 6%, and due in 60 days, is discounted at 5%. What are the proceeds? Ans. $2,804.64. 6. $8,476,000Scranton, Pa., Jan. 8, 1909. Six months after date I promise to pay to Charles Brown, or order, Eight Thousand Four Hundred Seventy-Six Dollars, value received, with interest at 6%. Howard Bristow. Find the proceeds of the foregoing note if discounted April 24, 1909, at 5%. Ans. $8,639.34. 7. A note for $2,800, due in 3 months, is dated June 5, 1908, and bears interest at 7%. It is discounted July 20, 1908, at 6%. Find the proceeds. Ans. $2,826.68. 8. A note for $96,000, with interest at 8%, is dated Nov. 16, 1907, and is due in 90 days. It is discounted Dec. 20, 1907, at 6%. Find how much the proceeds differ from the true present worth. Ans. $8.45. |