-NRLF 
 
 B M SDl =16'! 
 
 • ■ :■:-■> 
 
 • ,' ' ■- ■'■• 
 
 ■ ' /' ■, ■■'■ '■"'' (. 1 
 
 . ;-r:iWA:ii 
 
 
 • 
 
 . 
 
 
 
NOTES ON 
 
 FOREIGN EXCHANGE 
 
 AND A GLOSSARY OF 
 
 FINANCIAL TERMS 
 
 I — I 
 
 BY 
 
 E L. STEWART PATTERSON 
 
 Fellow of the Canadian Bankers' Association, of the Institute of Bankers, London, 
 and of the American Intitule of Banking 
 
 AUTHOR OF 
 
 "PRACTICAL BANKING AND FOREIGN EXCHANGE" 
 
 ETC. 
 
 PUBLISHED BY 
 
 THE SHAW CORRESPONDENCE SCHOOL 
 
 TORONTO 
 
 CANADA 
 

 COPYRIGHT. CANADA, 1916 
 
 By 
 
 THE SHAW CORRESPONDENCE SCHOOL 
 
 TORONTO. CANADA 
 
PREFACE 
 
 Although there are many excellent books on the subject of 
 Foreign Exchange, few have been written for beginners explain- 
 ing the essential principles of the science in simple language and 
 with suitable illustrations, and iione have been written, from a 
 Canadian standpoint. 
 
 The first eight chapters of this book were originally written 
 for private circulation among students preparing for the Asso- 
 ciates' Course of the Canadian Bankers' Association, and under 
 the title of "Foreign Exchange Arithmetic" gained the approval 
 both of students and of university authorities. The present vol- 
 ume, containing additional chapters, tables and a glossary, is the 
 response to the encouragement and the suggestions received. It 
 is not intended as a comprehensive treatise on the subject, and 
 little or no attempt has been made at continuity of treatment, but 
 practically every phase of Foreign Exchange has been dealt with. 
 It is hoped that it will prove a helpful book for the beginner and 
 a useful companion to the advanced student in his study of larger 
 and more theoretical works on the subject. 
 
 In a book of this kind, containing, as it does, numerous calcu- 
 lations, mistakes are unavoidable, and the writer would greatly 
 appreciate having his attention called to any errors or misprints. 
 
 E. L. STEWART PATTERSON. 
 
 Sherbrooke, Que. 
 
 357336 
 
CONTENTS 
 
 CHAPTER I. PAGE 
 
 Introductory 
 
 1. Definition ' 9 
 
 2. Gold the Standard 10 
 
 3. Transfer of Funds H 
 
 4. Similarity Between Inland and Foreign Exchange 12 
 
 5. Review 12 
 
 6. Illustrations 13 
 
 CHAPTER II. 
 
 The Principles of Exchange 
 
 7. Inland Exchange 16 
 
 8. New York Exchange 17 
 
 9. Foreign P^xchange 19 
 
 10. The Mint Par . 20 
 
 11. Gold Points 22 
 
 12. Rates of Exchange 23 
 
 13. How the Rates Are Made 25 
 
 14. Exchange Tables , 26 
 
 15. Bills of Exchange or Drafts 28 
 
 CHAPTER III. 
 
 A Day in An Exchange Box 
 
 16. Practical Exchange 30 
 
 17. Demand Sterling Sold 30 
 
 18. Demand Sterling Purchased 31 
 
 19. French Exchange 32 
 
 20. German Exchange 32 
 
 21. Sundry Drafts 33 
 
 22. Foreign Money Orders, etc 33 
 
 23. Circular Letters of Credit 35 
 
 24. Commercial Letters of Credit 36 
 
 CHAPTER IV. 
 
 Great Britain 
 
 25. Money 38 
 
 26. Coinage of Gold 39 
 
 27. . London Quotations 39 
 
 28. American Quotations 40 
 
 29. Profits 40 
 
 30. Conversions 41 
 
 31. Interest and Stamps 42 
 
 32. Purchase of Bills of Exchange 43 
 
 CHAPTER V. 
 
 Continental Exchanges — France 
 
 33. Money 47 
 
 34. French Quotations 47 
 
 35. American Quotations 48 
 
 36. Conversions 50 
 
 37. Proiits 50 
 
 38. Inte.-est, Stamp Duties, etc 51 
 
 39. Pmxhase of Bills of Exchange 52 
 
CHAPTER VI. PAGK 
 
 Continental Exchanges (Cont'd.) — Germany 
 
 40. Money 54 
 
 41. German Quotations 5.5 
 
 42. American Quotations 5,5 
 
 43. Conversions 56 
 
 44. Profits 57 
 
 45. Stamps, Interest, etc 58 
 
 46. Purchase of Bills of Exchange 59 
 
 CHAPTER VII. 
 
 Continental Exchanges (Cont'd.) 
 
 47. The Latin Union 62 
 
 48. The Netherlands 63 
 
 49. Austria-Hunoary 64 
 
 50. Russia . . ." 65 
 
 51. Scandinavian Union 66 
 
 CHAPTER VIII. 
 
 Sundry Exchanges 
 
 52. Great Exchange Centres 67 
 
 53. Moneys Used in the DitTerent Countries of the World. ... 68 
 
 54. Australasia 69 
 
 55. India 70 
 
 56. The Silver Exchanges 70 
 
 57. The Paper Exchanges 72 
 
 CHAPTER IX. 
 
 Foreign Exchange 74 — 76 
 
 CHAPTER X. 
 
 Rates of Exchange 77 — 78 
 
 CHAPTER XI. 
 
 Rates of Interest 79 — 81 
 
 CHAPTER XII. 
 
 Arbitrage 82 — 85 
 
 CHAPTER XIII. 
 
 Gold Shipments .* . 86— 92 
 
 CHAPTER XIV. 
 
 London, the International Clearing House 93 — 96 
 
 CHAPTER XV. 
 
 British Acceptances 97 — 99 
 
 CHAPTER XVI. 
 
 Finance Bills 100—102 
 
 CHAPTER XVII. 
 
 War and Exchange, Great Britain 103 — 106 
 
 CHAPTER XVIII. 
 
 War and Exchange, North America 107 — 1 16 
 
PAGE 
 
 Appendix A. 
 
 Practical Data 117 
 
 Constants 117 
 
 Interest on Bills of Exchange 117 
 
 Chain Rule 118 
 
 Multiplication 118 
 
 Mille 119 
 
 Trov Weight 119 
 
 •^t^' 
 
 Appendix B. 
 
 The Old Par of Exchange 120 
 
 't?^ 
 
 Appendix C. 
 
 Test Questions, Fellows 'Course, Set by Queen's University 123 
 Model Solutions 125 
 
 Appendix D — Tables 131 
 
 TABLE I.— Metal Contents of Gold Units 132 
 
 TABLE II.— Equivalent Values of Monetary Units 133 
 
 TABLE III.— French Exchange Table 134 
 
 TABLE IV.— German Exchange Table 135 
 
 TABLE v.— Moneys of Account 136 
 
 TABLP] VI. — Sixty-fourths Expressed in Decimals. . . . 138 
 
 TABLE VII.— Fractional Parts of IS^ 139 
 
 TABLE VIII. — Cardinal Numbers and Commercial Terms 
 
 in Ten Languages 140 
 
 TABLE IX.— Table of Moneys in Actual Use 141—144 
 
 TABLE X. — Symbols or Arbitrary Signs Used in Busi- 
 ness 145 
 
 TABLE XL— Money Symbols 14G 
 
 Glossary of Financial Terms 147 — 236 
 
NOTB3 ON 
 
 FOREIGN EXCHANGE 
 
 CHAPTER I. 
 INTRODUCTORY 
 
 A man ought to Tcnoic the measures, loeights, and monies of 
 all foreign countries, especially where we have trade, and the 
 monies not only by their several denominations hut also by their 
 intrinsique values in weight and fineness compared with the ■ 
 standard of the Mngdom, ^vithout xrhich he cannot well direct his 
 affairs. — Thomas Mun, "England's Treasure by Foreign Trade." 
 Circ. 1635. 
 
 DEFINITION 
 
 1. Definition. — Before taking up the study of foreign exchange it is 
 advisable to have at least an elementary knowledge of the principles on 
 which exchange is based. 
 
 Exchange may be defined as the method or system by which the 
 payment of an obligation in one place is accomplished by the transfer 
 of credit from another. Exchange operations therefore are based on 
 intercancellations of indebtedness, thus discharging obligations without 
 the transference of actual money ; i.e., gold or its equivalent. 
 
 Exchange is generally considered under two headings, inland or 
 domestic and foreign exchange. The former, however, is so generally 
 understood and so simple in its operation that it is seldom or never 
 referred to in text books on exchange except incidentally. This is a 
 mistake, as it has a tendency to create an impression that foreign 
 exchange itself is a complex and highly technical subject. Such is not 
 the case. The basic principles governing inland and foreign exchange 
 are the same, and there is nothing mysterious or difficult in either, the 
 operations in both being based on the weight and fineness (or degree of 
 purity) of the gold in the monetary units of the countries involved. 
 There are of course certain operations in international exchange which 
 call for a highly specialized knowledge, not only of exchange, but also 
 of economics and finance. These transactions, however, stand in a class 
 by themselves and need not be considered here. 
 
10 Notes o-n Foreign Exchange. 
 
 GOLD THE STANDARD 
 
 2. Gold the Standard. — A reference to the chapter on "Barter and 
 Exchange" in any text book on economics will show how gold gradually 
 became the standard or common denominator of value in all civilized 
 countries, and that each country adopted as its monetary unit a coin 
 containing an unvarying weight of fine gold. Comparison between the 
 coins of any two countries is therefore a matter of simple arithmetic, 
 namely that of dividing the amount of fine gold contained in tlie 
 monetary unit of one coimtiy into the amount of fine gold contained 
 in the unit of the other. It must be remembered in this connection that 
 equal weights of gold, whether in coin or bullion, are given or taken 
 in exchange for each other the world over. 
 
 Canada, for 'instance, has adopted for its monetary unit the gold 
 dollar weighing 25.8 grains, 9/lOth fine, or containing 23.22 grains of 
 fine gold and 2.58 grains of alloy. The value of the alloy is never taken 
 into consideration, its purpose being to harden the coin, for if gold 
 alone were used the coin would be too soft to stand the wear and tear 
 of circulation. 
 
 The monetary unit of Great Britain is the sovereign, weighing 
 123.27447 grains, ll/12th fine, or containing 113.0016 grains of fine 
 gold. To compare these two units, divide the Aveight of fine gold in a 
 sovereign by the weight of fine gold in a dollar (113.0016^23.22) and 
 you will get $4.86656 as the number of dollars contained in a pouiul 
 sterling. Reverse the operation and you will get 49.316 pence, as the 
 iiiiiiiber of pence contained in a dollar. It is an unvarjnng principle 
 among civilized nations that the monetary unit shall have an intrinsic 
 value equal to the value stamped upon it. Melt down a sovereign and 
 you will have a sovereign's Avorth of gold, in the same way the gold in 
 the dollar is Avorth exactly one dollar. 
 
 Ill Canada, therefoi-e, the value of everything Ave l)uy and sell is 
 reckoned in gold dollars, or, in other Avords, in fractions or in multiples 
 of 23.22 grains of fine gold.* As a matter of convenience, hoAvever, avc 
 
 *Tf Brown in Toronto owes Smith in Winnipeg- $]00 he pays $100.25 to his 
 bank in Toronto in order that Smith may receive $100 in golil or its eqiuvaleut 
 in Winnipeg. As a matter of interest we will work the transaction out in terms 
 of gold. 
 
 Brown ^lays 2327.805 grains of fine gold (2322. grains plus 23.22-^4 grains 
 commission) in order that Smith may receive 2322. grains of fine gold in Wiiiiiii)og. 
 Now, if we divide 2322 and 2327. <S05 grains by 23.22 grains, tlie amount of fine 
 gold in the dollar, we get our original $100 and $100.25. 
 
 Similarh^ in sterling exchange, if a draft costs, for instance, one cent per 
 pound over ])ar, we pay $4.87 2/3 per pound sterliuL', or. worked out in grains of 
 
Introductory 11 
 
 use but little gold in our business transactions in this country, its place 
 being taken by legal tender notes and bank notes. These are simply 
 printed contracts issued by the Clovernment and by the banks, redeem- 
 able in gold dollars at the Avill of the holder. 
 
 The various monetary standards of the world are explained else- 
 where, and this brief reference is made to them to emphasize the fact 
 that the first and most important thing to learn about exchange is 
 that the foundation of all exchange transactions is based on the 
 fine gold contents of the different coins chosen as monetary units. 
 
 TRANSFER OF FUNDS 
 
 3. Transfer of Fimds. — The next important factor to consider in 
 exchange operations is the expense of transferring gold from one point 
 to another. This consists of : 
 
 1. Carriage. 
 
 2. Interest on the amount while in transit. 
 
 3. Risk. 
 
 The very general use of bills of exchange as a medium for trans- 
 ferring funds has caused this factor of expense to be more or less lost 
 sight of, except when conditions call for the actual shipment of gold. It 
 is, however, latent in every exchange transaction, thoug'h it may be 
 modified or even off^set by other factors such as the law of supply and 
 demand, the balance of trade, competition, etc. 
 
 Every school boy in Canada knows that to send money from one 
 part of Canada to another costs something, whether the money itself is 
 shipped direct or a bank draft purchased for the amount, the charge, 
 varying according to distance, competition, etc. The operation is simple, 
 and the reason for the charge is obvious. The charge for a similar 
 remittance from a Canadian town to or from a town in the United 
 States is equally comprehensible, the only difference in the conditions 
 being the existence of a boundary line between the two countries. The 
 first transaction is one in inland exchange, but the second is an opera- 
 tion in foreio-n exchange just as much as if it had been a remittance to 
 
 gold, we add one cent's worth of gold, or .2:i22 grains, to 113.0016 (the weight 
 of fine gold in the sovereign), and get 11.3.2338 grains, which, divided by 23.22 
 grains, gives lis $4.87656, or one cent over par. 
 
 If 4.8.5 is quoted, or 1% cents lower than par, we deduct .3870 grains 
 (.2322X1%) from 113.0016 and obtain 112.6146 grains, which is paid in Toronto 
 in order to deliver 113.0016 grains of pure gold in London. Divide the former 
 by 23.22 and we get $4.85, the required rate. All exchange quotations will work 
 out on the above basis. 
 
12 Notes on Foreign Exchange. 
 
 France or Germany. One operation is as easily understood as the 
 other, and yet foreign exchange is considered difficult! In this case 
 the same monetary unit is employed in the United States and in 
 Canada, a gold dollar 28.22 grains fine, hence the simplicity of the 
 transaction. 
 
 With this example before us of the similai'it\' between inland and 
 foreign exchange we think that we can establish the following 
 principles : 
 
 1. That if all the countries of the world adopted the gold 
 dollar 23.22 grains fine as their monetary unit, foreign ex- 
 change would be elementary in its simplicity. 
 
 2. That the names of the coins are immaterial so long as 
 
 their fine gold content is the same. 
 
 (For instance, if we had an English "dollar" unit 23.22 grains fine 
 it could be called the sovereign and the French "dollar" unit the 
 franc, and so on, without affecting the situation.) 
 
 3. That foreign exchange would still be very easy if the gold 
 
 contents of the monetary units were exact multiples or 
 
 sub-multiples of each other. 
 
 (If the .so'^ereign contained exactly five times as much gold as the 
 dollar and the dollar five times as much as the franc, and so on, 
 it would be as simple as a universal unit.)* 
 
 SIMILARITY BETWEEN INLAND AND FOREIGN EXCHANGE 
 
 4. Similarity Betivevn Inland and Foreign Exchange. — Now, if the 
 above principles are conceded w^e should have no difficulty in dealing 
 with the irregular weights of the monetary units in actual use, as the 
 only difficulty presented is the fact that the aiithmetic cannot be done 
 mentally, but must be worked out. That is all tlie difference, and we 
 can all do long division. 
 
 If foreign exchange is studied from this point of view, there 
 should be no difficulty found in understanding its operations, especially 
 after the explanations given hereafter are fully mastered. 
 
 REVIEW 
 
 5. Review. — The qui\stiun naturall}' arises, '"If exchange is so simple 
 why are all these explanations necessary?" They are not necessary if 
 you wish only to learn the mechanical working of exchange without 
 knowing the reason for what you do. We can do all kinds of things in 
 
 *The British sovereign is not quite five times the value of the dollar by 13.3 
 cents, or 3.096 grains of fine gold, and the franc to be 1/5 of the dollar would 
 have to be increased by 7/10 of a cent, or .164 grains of gold. 
 
Introductory 13 
 
 these days with electricity, for instance, and do them well, simply by 
 inserting plugs or pressing buttons, but if we wish to be electricians we 
 must learn how the current is created, its nature and its application. 
 Similarly, with exchange tables, we can work out almost any exchange 
 transaction providing tlie rate is already made for us, but if we want 
 eventually to become expert bankers and cambists we must be able to 
 make our own tools occasionally, able for instance to compute a 60 or 
 90 day rate from a demand quotation ; we should also knoAv something 
 about the factors which influence the fluctuations in rates and about the 
 commercial laws and observances of the different countries. If, however, 
 this intelligent knowledge is not aimed at, common sense and a working 
 knowledge of multiplication and division will be found sufficient with the 
 assistance of the following tabloid rules: 
 
 1. All operations in oxchanore are based on the weight and fineness of 
 the metals contained in the monetary units of the countries in- 
 volved. 
 
 2. The rate of exchange between two countries is fixed by the country 
 which draws and negotiates the bills. 
 
 3. All exchange rates in North America are quoted in cents per foreign 
 unit. 
 
 Special quotations: 
 
 A. German exchange — cents per four marTcs. 
 
 B. French exchange — francs per dollar. 
 . Conversions with cent quotations. 
 
 (a) Amount in forcif/n curreneij — Aviount in dollars — Bale in cents. 
 
 (b) Amount in dollars— Amount in foreign exclmngcXEate. 
 ■■'Buy low, sell high, the better the bill the higher the rate. 
 
 Conversions with franc quotations. 
 
 (a) Amount in francs — Bate in francsX Amount in dollars. 
 
 (b) Amount in dollars^ Amount in francs-^llate in dollars. 
 *Bu3^ high, sell low, the better the bill the lower the rate. 
 
 ILLUSTRATIONS 
 
 6. Illustrations. — Mr. Hartley Withers in his "Money Changing'' 
 
 gives such a clear and interesting explanation of foreign exchange that 
 
 he is well worth quoting in full : 
 
 The bill, or order to pay money in a foreign centre, is thus tlie commodity 
 that is actually bought and sold by dealers in foreign exchange, but it is better 
 for the moment to leave bills out of consideration. They are only the tangible 
 expression of the claim for money in another centre, and at this early stage of 
 our enquiry it is better to keep our minds fixed on what is at the back of the 
 bill, namely, the money in a foreign centre to which it gives its holder a claim. 
 The French buyer of a bill on London buys it, as a rule, because by sending it 
 to his English correspondent he can discharge a debt to him in English money. 
 What he really buys with his francs is so many English pounds, and the labyrinth 
 of the foreign exchanges is much easier to thread if, before we complicate the 
 question by talking about bills, we keep our eye on the comparatively simple 
 problem which is the key to the puzzle, namely, the exchange of one country's 
 money for another's. 
 
 *See Note, Page 20. 
 
14 Notes ox Foreign Exchange. 
 
 Thus stripped to its naked simplicity, the problem begins to look as if it 
 were not a jirohlem at all, and a critical inquirer may be excused for thinking 
 that at least in the case of countries that use currency based on the same metal 
 there ought to be no need for daily quotations of rates of exchange, because the 
 relative value of their monies ought to bo constant. It is a natural question to 
 ask, why should there be these daily ductuations, and since they are evidently 
 there, what is the sense or purport of them? The answer is, that money in 
 France and money in England are two different things, and the relative value 
 of any two different things is almost certain to fluctuate. Quite apart from any 
 differences in the fineness of gold coined by two different countries, or the ease 
 or difficulty with which a credit instrument can be turned into gold, mere distance 
 is quite enough to make the difference that will create fluctuation in price. New 
 York and Chicago use exactly the same currencies, but money in New York 
 differs from money in Chicago by being nearly a thousand miles away, and 
 consequently there are frequent variations in tlieir relative value. The English 
 and Australian so^•ereigns are identical in weight and fineness, but there is con- 
 stant fluctuation in the buying power of the English sovereign as expressed in its 
 brother that is circulating in the Antipodes. 
 
 These fluctuations are based on the same influence that sways the movements 
 in the prices of all goods and services that are bought and sold, that is, the 
 influence of supply and demand. Just as the price of boots. Consols, medical 
 advice, football professionals, or anything else that can be the subject of a 
 bargain, will depend in the end on the number of people who want to buy them 
 compared with that of those who want to sell them, at or near a certain figure, 
 so the price of English pounds, when expressed in francs, guilders,, milreis, or 
 Australian sovereigns, depends on the number of people abroad who have to buy 
 money in England as compared with the number of those who have money in 
 England to sell. People abroad have to buy money in England when they owe 
 money to Englishmen and want to pay it: and they have money in England to 
 sell when Englishmen owe them money. 
 
 Jacques Bonhomme in Paris has been selling shiploads of Christmas kickshaws 
 to John Robinson in London, and so has thousands of English pounds due to him 
 by the said Robinson. But English pounds, as such, are not wanted by M. Bon- 
 homme. He wants to sell them, to turn them into francs, the currency of his own, 
 country, with which he makes his daily iiayments at home. On the other hand, 
 there are always ijlenty of Frenchmen who have imported English goods or have 
 had services rendered i3y English bankers, or shipowners, or insurance companies, 
 and so want to buy English money wherewith to pay their English creditors. So 
 it follows that the price that M. Bonhomme will get for his English pounds will 
 depend on the value of goods and services that other Frenchmen have been 
 selling in England, so producing English pounds to be sold in Paris, as compared 
 with the value of the claims that have to be met in London, for the satisfaction 
 of which English pounds ha\ e to be bought. If the amount of English money 
 on offer is bigger than the amount wanted, down will go tlie price of the English 
 pound as expressed in francs, and the seller will get less in francs for his pound, 
 if the amount of English money wanted is the bigger, the price will go up. and 
 the seller will get inore for his pound. When the price goes down the exchange is 
 said to move against London, because there is a depreciation in the value of 
 the sovereign as expressed in francs: when it goes up the exchange moves in 
 favour of London, because the buying power of the sovereign ij? enhanced. 
 
 The process is exactly the same, and is even more simple and easy to under- 
 stand when we take away the complication of tlie exchange of the monies of two 
 dift'eront nations and look at it at work between two distant towns of the same 
 country. If in the course of trade New York has large payments to make in 
 Chicago, money in Chicago will be wanted in New York, and cimpetition there 
 will send up the price of it, so that a dollar in Chicago will be worth more for 
 the time being to New Yorkers than a dollar in New York, and any New York 
 bank or firm that has a balance or a credit in Cliicago will be able to dispose of 
 it at a premium. The extent of this premium, however, will obviously be limited 
 
Introductohv 15 
 
 by tlie expense involved of sending lawful money, as the Americans call it, from 
 New York to Chicago. If we suppose, for the sake of simplicity, that the cost 
 of sending a dollar and insuring it is covered by a cent, no one in New York 
 will pay much more than one dollar and a cent for a dollar in Chicago. Rather 
 than do so he will send his dollar. He will ])robably pay a small fraction more 
 to save himself the trouble and time imolved bj^ sending and insuring money, 
 and this minute fraction tliat he will sacrifice is the opportunity of the 'exchange 
 dealer, who will send money to Chicago, and put himself in funds there, and so 
 be able to supply money in Chicago to any one in New York who will pay for it 
 at the rate of one dollar anil one cent plus any profit that the exchange dealer 
 can squeeze out of him. 
 
 Viewed in this simple example the problem of exchange has few terrors. It 
 is merely a question of the price of money in one place, as expressed in the same 
 money in another, with fluctuations governed by supply and demand and limited 
 by the cost of sending money from place to jdace. This limitation does not mean 
 that su])ply ami demand cease to govern the market, but merely that at a point 
 sujiply can be increased to meet any demand by the despatch of currency. 
 
CHAPTER II. 
 
 THE PRINCIPLES OF EXCHANGE 
 
 Lay by arhitrary Dames pence and shillings and consider and 
 speak of it as grains and ounces of silver and it is as easy as 
 telling of twenty. Locke, 1695. 
 
 Lay hy arbitrary names pounds, dollars, francs, etc., and con- 
 sider and speak of real vioney as the weight of pure gold or pure 
 silver and the comprehension of money is as tasy as telling of 
 twenty. 
 
 Consider that .subsidiary coins are only tokens of the standard 
 coins and not intended to-be a proportionate equivalent value icith 
 ' standard coin, and that all credit, instruments on paper are only 
 promises or orders to pay money. J. H. Norman. 
 
 INLAND EXCHANGE 
 
 7. Inland Exchange. — Inland or domestic exchange is a term applied 
 to the transfer of funds betweeen points in the same country, generally 
 through the medium of bank drafts or cheques. As inland exchange 
 deals with only one kind of money no conversion is necessary as in the 
 ease of foreign exchange, and the difiference between the amount remitted 
 and the amount paid for a draft is quoted as a discount or a premium 
 on the amount. Domestic exchange acts as a clearing house between 
 different sections of the country, whereas foreign exchange operates as 
 a clearing house between nations. 
 
 Exchange is said to be in favour of Toronto, for instance, and 
 against Montreal when the demand for remittances from Montreal to 
 Toronto exceeds the demand for remittances from Toronto to Montreal, 
 because under these circumstances a draft on Montreal could be pur- 
 chased at a discount in Toronto, while a draft on Toronto would be at a 
 premium in Montreal. 
 
 The discount or i>remium on the transfer of domestic funds known as the 
 actual or market rate, applies only to large or wholesale transactions of $50,000 
 or over between banks and not to counter transactions, for which tlie usual 
 banking commission is charged no matter how the actual exchange stands 
 between two points. (See New York Exchange, Section 8.) 
 
 Changes in both domestic and Xew York rates are small in amount and the 
 fluctuations are frequent, and it. is impossible to apply them to" the ordinary 
 counter or retail transactions, so the banks charge a flat rate, irrespective of 
 the market. A parallel will be found in the case of wheat, which can fluctuate 
 widely without aflecting locally the jirice of bread. 
 
 In Canada the rate of inland exchange between banks and the rate charged 
 to their customers is generally very mucli below the actual cost of shipping gold. 
 This is due to The fluid nature of money and credit in Canada as a result of the 
 branch banking system. Competition is an important factor in maintaining low 
 rates of inland exciiange. A bank through its Ijranclies and circulation is generally 
 able to supply its own domestic exchange requirements, and it is only in the 
 case of special transactions that outside purchases or sales are made, conse- 
 quently there is little or no occasion for the study or j)ractiee of domestic 
 arbitrage. 
 
 1 
 
\ 
 
 \ 
 
 The Principles of Exchange 17 
 
 NEW YORK EXCHANGE 
 
 8. New Yo)-k Exchange. — Although technically exchange transac- 
 tions with the United States come under the head of foreign exchange 
 they are never so considered, owing to the fact that Avhat we might 
 call the North American dollar, 23.22 grains fine, is used by both 
 countries. The rate of exchange on wholesale transactions is quoted 
 in sixty-fourths of 1% (15f cents per $1,000) premium or discount as 
 the case may be. 
 
 The conditions which influence exchange between Canada and 
 the United States illustrate the way in which similar factors affect the 
 quotations both of inland and of foreign exchange. "Exchange" just 
 like any other commodity is subject to the laws of supply and demand. 
 If the supply exceeds the demand prices (i.e. exchange rates) go down, 
 and vice versa. If Canadian exports to and imports from the United 
 States are equal, exchange will be at par. If our exports are the 
 larger New York funds will be plentiful and will be (pioted at a dis- 
 count. If on the other hand our imports are the larger, New York 
 exchange Avill be scarce and quoted at a premium.* The difference 
 in the money value of the exports and of the imports of anj' country is 
 called the balance of trade in favour of or against that country, and 
 it may be considered as between ttvo countries or as between the country 
 in question and all other countries. 
 
 At the beginnino- of the war, early in August, 1914, New York being 
 heavily indebted to London and to Canada, New York funds in Canada were 
 quoted at 3/32 discount: the unwillingness of New York to part with gold at this 
 time increased the discount, until it reached over 1% at the end of August. 
 
 This abnormal condition of a discount on New York funds, greatly in excess 
 of the gold import point (70 cents), obtaineil during the months of September and 
 October, but gradually decreased until par was reached on 30th October. (See 
 Section 11.) 
 
 The balance of payments then passed to the other side, the T'niteil States 
 became the creditor nation and the premium on New York funds gradually rose, 
 until on 2nd January, 1915 it reached 1% premium, as Canada in its turn was 
 now unwilling to ship gold. The sale of government, municipal and other bonds 
 in the United States and the decrease in Canadian imports from the United States 
 tended to gradually reduce the premium on New York funds until they were cjuoted 
 at par on Octo])pr 20th and at a discount on November 12th. 
 
 A shipment of gold can be made between New York and Montreal 
 at a rate of about 70 cents per $1,000 or about four and one-half 64ths of 
 1% (65 cents express and 5 cents cooperage and carriage). A bank, as 
 a rule, would hring gold to Canada as soon as a rate of 4/64 to 5/64 
 discount was quoted, or would sliip gold to New York before 5/64 
 premium was reached. It would, however, probably be willing to pay 
 
 *See page 10. Eead "Montreal" for "Chicago." 
 
If^ Notes on Foreign Excitaxge. 
 
 a small fraction more to save itself the trouble and time involved by 
 the transfer of gold, and this fractional advance represents the profit 
 to the seller when funds are at a premium, and to the buyer Avhen 
 funds are at a discount. As a I'ule, however, the ordinary business 
 between Canada and the United States is conducted without having 
 recourse to gold shipments either Avay. 
 
 From the above it will be seen that the import of gold to jMontreal 
 from New York implies : 
 
 1st. — That New York owes Montreal. 
 
 2nd. — That bills of exchange on New York have been offered 
 freely in Montreal to absorb this balance. 
 
 3i'd. — That these bills have been offered by sellers at a dis- 
 count in ordei- to stimulate buying, but that this discount 
 did not exceed (under normal conditions) 4/64 to 5/64ths 
 of 1 per cent, or about 70 cents per $1,000, at which rate 
 it would be better to buy gold in New York and bring it to 
 Montreal. 
 
 Conversely the export of gold from ^lontreal to New York 
 'implies : 
 
 1st. — That Montreal owes New York. 
 
 2nd. — That bills of exchange on New Yoi'k have been eagerly 
 sought fen- in ]Montreal in order to liquidate this indebted- 
 ness. 
 
 3rd. — That a premium has been offered by buyers to induce 
 selling, but that this premium did not exceed 70 cents 
 per thousand. At a higher rate tlian this it would be 
 cheaper to buy gold in Montreal and ship it to New York. 
 
 The same main conditions apply to foreign exchange transactions 
 l)etween Canada and any other country, the only difference being in 
 the range of the discount oi* premium, which of course is governed liy 
 the cost of shipping gold, and this cost 'is in its turn govei'ued by the 
 distance the gold is shipped. 
 
 Until 1912 New York fun<ls in Cnnada were gonerally at a disooinit, averag- 
 ing about 1/32 of 1% in spite of the fact tluit the so-called " balaiu-e of trade'' 
 was always against Canada. In other words, imports from the United States 
 exceeded exports to the United States by some $2.50,000,000 a year, an.l yet 
 the exchange was generally in favor of Canada. This abnormal condition was 
 (hie principally to the steady flow of British and foreign cajutal into Canada 
 during the period referred to, the relative exchange operations l)eing effected 
 through New York. "With the diminution of the volume of these investments 
 and the constantly increasing remittances to Europe on account of dividends, 
 
The Peinciples of Exchange 19 
 
 interest, etc., the position is gradually being reversed, and since 1912 the tend- 
 ency of the market for New York funds has been more or less against Canada. 
 The average rate now shows a slight premium, a state of things which will 
 probably become permanent, except in periods when Canada is selling bonds in 
 London and New York on a large scale. 
 
 In connection with New York exchange there is one factor that must never 
 be overlooked, and that is, that New York being the financial centre of the 
 continent, all foreign exchange rates throughout Canada are based on New York 
 quotations, and Canadian quotations therefore will fHfer from the original quota- 
 tions in New York to the extent of the discount or premium on New York 
 funds. If New York funds arc at par in ]\Lontreal and Toronto, tlie quotation for 
 exchange will be practically the same in both countries, as the transfer of funtts 
 between Canada and New York, theoretically necessary to cany out the trans- 
 action, can be made without gain or loss. If New York funds, however, are at a 
 discount or premium, the quotations are shaded accordinglv. In, sterling com- 
 putations $8, $15, $2.3 and $31 (or .0008. .0015, .0023, .0031 per pound) per £10,000 
 are generally taken as representing 1/01, 1/32, 3/64 and 1/lG, respectively, and 
 deducted from or added to the New York quotations. For instance, if the New 
 York rate for denjand bills is quoted at 4.862.5 and New York funds in Montreal 
 are 3/64 discount, the Canadian equivalent rate will be .$4.8625— .0023 = $4,8602 
 per pound sterling.* 
 
 FOREIGN EXCHANGE 
 
 9. Foreign Exchange. — Foreign exchange may be defined as the 
 system by which one country adjusts its financial transactions with 
 another country, f The mutual indebtedness of two countries arises 
 from a combination of the following : 
 
 Exports of merchandise. 
 
 Investments abroad. 
 
 The purchase of foreign securities. 
 
 Payments of interest and dividends to foreign shareholders. 
 
 Charges for transportation, insurance and commission paid to 
 
 foreign corporations. 
 Tourists' expenditure, etc. 
 
 Sometimes the resulting balance of payments is in favour of one 
 country and sometimes of the other, and exchange rates rise and fall 
 accordingly. There are, of course, many other reasons which affect the 
 course of the exchanges, l)ut the above are the principal factors in the 
 fluctuations. 
 
 The pi'incipal operations of foreign exchange include the issue of 
 various forms of commercial paper, money orders, letters of credit pay- 
 able abroad, cable transactions, drafts for the value of goods exported 
 and the purchase or sale of bullion or foreign coin. 
 
 Foreign exchange differs from inland exchange in two important 
 respects. In the first place if the monetary units are of different 
 
 *For mark and franc quotations, see Germanv (Section 42) and France 
 (Section 35). 
 
 tSee Section 8. 
 
20 Notes ox Foreigx Exchange. 
 
 weights and fineness it is necessary to convert the money of one country 
 
 into its equivalent in the money of another country, and, in the second 
 
 place, interest becomes an important factor in the transaction ; for 
 
 instance, a man pays cash in Montreal for a draft on London, but eig'ht 
 
 or ten days must elapse before he gets the use of the money in London, 
 
 and the interest for this period must be taken into consideration. 
 
 When foreign exchange is quoted in tlie home eurrencv {e.g. dollars and cents) 
 per foreign unit, it is called fixed excliange. For instance, exchange on London 
 f!; quoted in Canada in dollars and cents per pound sterling. The latter is the 
 fixed basis and its value fluctuates in dollars and cents, and the higher the 
 quotation the higher the cost of fixed exchange. When the rate is quoted in 
 foreign units per home unit it is called movable exchange. For instance, ex- 
 change in Paris is sometimes quoted in fr;>ncs and coutimes per dollar. The 
 dollar is the fixed basis. The fluctuations occur in the foreign currency, and the 
 higher the quotation the lower the costs of the excltange — you get more francs 
 for your dollar. Canada and the T'^nited States quote in fixed exchange for all 
 countries, though for large transactions with France and the other members of 
 the Latin Union, movnhle e.rchaiine is used. 
 
 THE MINT PAR 
 
 10. The Mint Par. — The mint par between anj' two countries which 
 use the same metal for their standard coinage is found b}^ comparing 
 the standard coin of each, basing the calculation on the weight of the 
 pure metal in each coin. The mint par l)etween two countries never 
 varies unless one of them alters its coinage regulations by increasing or 
 decreasing the quantity of pure metal in its monetary unit. 
 
 Between a gold standard country and a silver standard country 
 there can exist no fixed par of exchange, for the reason that the value 
 of silver in relation to gold is subject to great fluctuations. 
 
 Almost all the leading countries of the world are now on a g'old 
 basis or standard, only China and a few of the less important South 
 American republics being on a silver basis. France and the other 
 countries in the Latin Union are in theory bimetallic (pledged to the 
 unlimited coinage of both silver and gold coins), but practically they 
 are to all 'intents and purposes on a gold basis. 
 
 All coins whether of gold or silver are made of so much pure metal 
 and so much alloy; the latter is used to harden the coins and its value 
 is neglected in exchange calculations. The term "fineness" expresses 
 the number of parts of pure gold or pure silver contained in a thous- 
 and parts of the combination. 
 
 The British sovereign is 916 2/3 fine or 11 parts of fine gold and 
 one part of alloy. The gold co-ins of Turkey and Brazil are also 11/12 
 fine. Those of nearly all other countries are on a basis of 900 fine 
 or 9/10 fine gold and 1/10 alloy. 
 
 In Table No. I will be found a list of the principal gold standard countries 
 with the names, weights, and \alues of their various units. 
 
• 
 
 The Principles of Exchange 21 
 
 The weights are given both in grammes and in grains, but as practically 
 every country with the exception of Great Britain, Canada and the United States 
 uses the metric system,, calculations are more frefjuently made in grammes (a 
 gramme= 15.43235 grains). 
 
 The names of the countries are arranged according to the weight of their 
 monetary units. Egypt and Great Britain have the largest units, France and the 
 Latin Union the smallest. 
 
 Column No. 4 in the table gives the values in dollars, and is arrived at by 
 dividing the weight of pure gold in the dollar into the weight of pure gold in 
 the other units. Similarly dividing by the weight of the sovereign gives the 
 values in English money, the answer tilwnifs heiny in the currency represented by the 
 divisor. For instance, compare the sovereign and the gold dollar: 
 
 Gross weight of sovereign 
 
 Less 1/12 alloy 
 Pure gold in sovereign 
 
 Gross weight of dollar 
 Less 1/10 alloy 
 
 Pure gold in dollar 
 
 Therefore: 
 
 1 dollar = 
 1 pound = 
 
 23.22X240 
 113.0016 
 113.0016 
 
 23.22 
 
 123.27447 
 
 10.27287 
 
 grs. 
 
 113.00160 
 
 grs. 
 
 25.8 
 2.58 
 
 grs. 
 
 23.22 
 
 grs. 
 
 = 49.316d or £ .205484 
 
 = $4.86656* 
 
 
 Similarly a franc contains 4.48036 grs. of pure gold. 
 
 23 '^2 
 * 1 dollar = — r-TlJ7^ = F^'s. 5.182621 
 
 4.4803b 
 
 1 franc = -^^^ = I .102953t 
 
 The British sovereign is legal tender in Great Britain and all the British 
 colonies (including Canada), and is current practically all the world over. 
 
 United States gold is legal tender in Canada, Alaska, Hawaii, Panama, Porto 
 Rico and the Philippines. 
 
 The Scandinavian Union consists of Denmark, Norway and Sweden; the 
 names and values of their coins are the same for the three countries. 
 
 The Latin Union consists primarily of France, Belgium and Switzerland 
 (franc), Greece (drachma), and Italy (lira). 
 
 Although not members of the Latin Union, Eoumania (lei), Bulgaria (lew), 
 Spain (peseta), and Serbia (dinar), have adopted its monetary system, so that 
 practically all the south of Europe is on the same basis. 
 
 Venezuela (bolivar) has also adopted this system. 
 
 Table No. II gives the equivalent values of the monetary units of the various 
 countries, the values being arrived at by dividing the pure gold contents of the 
 unit in grammes or in grains (Columns 6 or 8, Table No. I) into each other. 
 
 For instance, .6048 grammes, the weight of pure gold in the Dutch florin, 
 divided into the weight of all the units in Column 6 (Table No. I), will give the 
 value in florins of the other foreign currency as given in Column 4 (Table No. II). 
 
 *The exact par point, 4.86%, is sufficiently close for all purposes, and is 
 the legal par as established by the Currency Act. 
 
 tThese are the real par points; 19.3 cents to the franc and 5.18% francs to 
 the dollar are convenient approximates. 
 
22 Notes ox Foreign Exchange. 
 
 The following table shows (lie amount of the eiirrency of the various countries 
 which can be coined from 1,000 grammes of pure gold and from 1,000 grammes of 
 minted or eagle gold 900. fine, and is both interesting and useful:"- 
 
 Great Britain 
 
 £ Sterling 
 
 1000 Gkam.mfs 
 Pure Hold Mint(iiold9/10i 
 
 136.5675 
 
 North American 
 
 Dollars 
 
 664.6144 
 
 $ 598.153 
 
 Russia 
 
 Roubles 
 
 1291.66 2 3 
 
 R. 1162.50 
 
 Japan 
 Holland 
 
 Yen 
 Florins 
 
 1333.33 1,3 
 1653.44 
 
 Y. 1200. 
 Fi. 1488.10 
 
 Scandinavian Union 
 Germany 
 
 Crowns 
 Marks 
 
 2480. 
 2790. 
 
 Cr. 2232. 
 M. 2511. 
 
 Austria 
 
 Crowns 
 
 3280. 
 
 Cr. 2952. 
 
 Latin Union 
 
 Francs 
 
 3444.44 4,, 9 
 
 Fes. 3100. 
 
 GOLD POINTS 
 
 11. Gold Points. — The mint or theoretical par remains invariable in 
 gold standard countries. If the exporting and importing of gold could 
 be effected Avithout expense or loss of interest, the mint par and gold 
 points between any two countries would be practically identical, but a 
 shipment of gold involves heavy expenses for interest, abrasion, freight, 
 insurance, cooperage, cartage and other charges. These deducted from 
 the mint par give the "import gold point" and added to the mint par 
 give the "export gold point"; that is to say Avhen it costs more to buy 
 sterling exchange in New York than it would cost to buy gold and 
 shi]) 'it to London, the remitter naturally takes the cheaper method 
 and exports gold, but Avhen, on the other hand, exchange is so freely 
 offered in New York that the rate becomes abnormally low, a seller 
 may find it cheaper to transfer his London balance l)y importing gold. 
 
 The charges on a shijnnent of gold to London or Paris vary with each shipper, 
 and these are trade secrets which are jealously guarded. It is, therefore, 
 impossible to give any exact figure, but, roughly speaking, the gold points for 
 sterling are 7/16 to J^ of 1% on either side of the mint jiar, or two cents to two 
 and a half cents per pound sterling. Sometimes special concessions are oflfered 
 by the receiver of the gold which materially reduce the expense of the shipment. 
 The half of one per cent, thus abso];i)ed by freight, insurance, brokerage and 
 incidental costs constitutes a natural bar to the more frequent shipment of bullion 
 between two countries. The intermediate rates between these gold points and the 
 mint par, that is, the rates at which business is usually done, rise and fall in 
 sympathy with the influences at work on the other exchanges. New York, for 
 instance,, whilst a debtor to England, may be a creditor of Germany, France or 
 
 *ThG figures in either column may be used in determining the mint par 
 between any two countries. For instance 3'280 crowns divided into 2790 marks 
 will give .85061 marks as the value of the crown, and 2952 crowns divided into 
 2511 marks will again give .85061 marks. 
 
 
The Principles of Exchange 
 
 23 
 
 
 Imports 
 
 Pat 
 
 New York and London 
 
 1 4.84J 
 
 $ 4.861 
 
 New York and Paris 
 
 5.23 
 
 5.18^ 
 
 New York and Berlin 
 
 94.50 
 
 95 8^ 
 
 London and Paris 
 
 25. 32^ 
 
 25.22 
 
 London and Berlin 
 
 20.53 
 
 20.43 
 
 London and Amsterdam 
 
 12.15 
 
 12.10 
 
 other countries with which England has close exchange relations. New York 
 drafts on these places are remitted to London and improve (i.e. lower) the rate of 
 sterling exchange, for the time being. Tf, however, the supply both of London 
 and of Continental bills falls short,, the point at which New York will have to 
 export gold is soon reached, but, as stated by Ricardo, "the variation of the 
 ' ' exchange with foreign countries can never for any considerable time exceed the 
 ' ' expense of transporting and insuring the pvecious metals from one country to 
 ' ' another. ' ' 
 
 The extreme range of the gold points between New York and London and the 
 continental centres is approximately as follows: 
 
 Exports 
 I 4.88^ per£l. 
 
 5.16 fcs. iwv$]. 
 96.25 cents per 4 marks. 
 25.12^ fcs. per£l. 
 20.34 mke. per£l. 
 12.04 florins per £]. 
 
 Under normal conditions margins between the two shipping points are thus 
 sufficiently large to allow considerable play to the numerous factors aflPecting 
 international finance and trade, and the rates fluctuate more or less regularly 
 between the two points. Wars and rumors of wars and other startling jiolitical 
 events frequently disturb the delicate working of the exchanges and cause the 
 rates to go beyond normal limits. For instance, in the first week of August, 1914, 
 demand sterling was quoted in New York at $6, and cables at $7 per pound. It 
 soon declined from these figures, however, and continued dropping until the middle 
 of February, 1915, when "demand" was quoted $4.79, and on September 1st, 1915, 
 at $4.50.* 
 
 During a serious war, therefore, the courses of exchange are no longer 
 restricted by the "gold points," but fluctuate widely, and at times wildl_v. Among 
 the new factors which then affect the exchanges may be mentioned the demoraliza- 
 tion of the international money markets, the sentimental, if not legal, restriction 
 placed on the export of gold by every country, and the risk attending transporta- 
 tion, insurance, if obtainable at all, being at a prohibitive rate. 
 
 RATES OF EXCHANGE 
 
 12. Rates of Exchange. — A rate of exchange is best defined as the 
 price of the monetary unit of one country reckoned in the money of 
 anoflier country. In speaking of the rate of exchange with Great Britain, 
 for instance, the quotation 4.8666 means that in New York a draft pay- 
 able in London can be purchased at the rate of $4.86-2/3 for each pound 
 sterling. All foreign exchange rates in Canada and the United States 
 are quoted as so many cents per foreign unit. In large transactions with 
 Germany, however, rates are quoted as so many cents per four marks 
 
 *In 187.S sterling drafts sold at $4.62^^, while during the panic of 1857 sixty 
 day bills sold at 25% discount (on the old par of exchange, 4.44 4/9), or $3.33 
 per pound. 
 
24 Notes ox Foreign Exchange. 
 
 because four marks are so nearly equivalent to one dollar, and the French 
 rate is quoted as so many francs per dollar* 
 
 Tn i-ef^ard to the exchanges which are quoted in cents per foreign 
 unit the following two simple rules suffice: 
 
 To convert dollars into foreign currency. 
 
 Rule. 
 
 Divide the amount in dollars hy the rate in cents per foreign unit. 
 
 Example: — 
 
 How many francs can he bouglit for $1,000 at \9.?> cents per franc? 
 
 1000^]9.3 -5181. 35- francs. Answer. 
 How many marks can be bought for $1,000 at 23.26 cents per mark? 
 
 1000^^23.26 = 4299.23 marks. Answer. 
 
 How many kronen can be bought for $900 at 26.46 cents per krone? 
 900 ^ 26.46 -=3401.36 kronen. Answer. 
 
 To convert foreign currency into dollars. 
 
 Rule. 
 
 Multiply the amount in foreign curroicy hy tlie rate in cents per 
 foreign unit. 
 
 Example: — 
 
 How much will drafts for the following amounts cost? 
 
 600 francs at 19.26 cents: 
 600X19.26 = $115.56. 
 
 800 marks at 24.21: 
 
 800X24.21 = $]93.C8. 
 
 3401.26 kronen at 26.46: 
 3401.26X26.46 = $900. 
 
 It will thus be seen that the arithmetic of the exchanges is very 
 simple and these two rules suffice for all ordinary exchange calculations, 
 though franc quotations per dollar and the fractional market rates require 
 a little more study. 
 
 Those countries which are fortunate enough to have a monetary 
 unit in common, have no conversion to nuike and do not require any 
 exchange tables. Among these may be mentioned Canada and the 
 United States with the dollar in common, Great Britain and her colonies 
 with the pound sterling and the Latin rnion witli the franc. Exchange 
 
 *Similarly sugar may be quoted at so many cents per pound, or at so much per 
 four pounds or per one hundred pounds, just like ordinary exchange, aild the 
 higher the price quoted the less sugar for foreign money) you get for your mone}-, 
 and therefore the dearer the exchange. 
 
 Sugar may also he quoted at so ma^ny pounds for the dollar (as is the case 
 with the French franc), and tlien the more sugar (or francs) quoted for a dollar 
 the cheaper the exchange. 
 
The Principles of Exchange 25 
 
 rates in these cases are quoted at either so much per cent, discount or 
 premium, or as in the case of London and Australia so many units, for 
 so many units, as £98 per £100. 
 
 HOW RATES ARE MADE 
 
 13. How the Rates Are Made. — A question which might naturally 
 occur to anyone is, "Who makes the rates or decides the range and fre- 
 quency of their fluctuations?" The answer is, "No one." Exchange 
 is as subject to the law of supply and demand as wheat, copper or any 
 other commodity. 
 
 To the question "Where is the rate made?" the answer is that, 
 subject of course to market conditions, it is as a rule fixed by the 
 country which draws and negotiates the bills. For instance, practically 
 all exchange transactions between London and America originate on 
 this side and the rates for sterling exchange are therefore fixed in 
 New York. 
 
 The American exporter, rather than await a remittance, prefers to 
 sell his bill and obtain ready money by drawing on his customer. The 
 importer likewise who has bought goods abroad would rather remit for 
 them to the foreign exporter than allow the latter to draw against them. 
 In the former case he can obtain as low a rate as possible from his bank 
 while in the latter he would have to pay a rate fixed by a foreign bank 
 or broker who would not have the same interest in the transaction. 
 
 In New York, foreign exchange brokers, as they are called, act as 
 ' intermediaries between buyers and sellers, calling daily on the leading 
 bankers and exchange houses to enquire if they are buyers or sellers and 
 at what price. A broker thus not only brings buyers and sellers together, 
 but obtains an approximate knowledge of the general supply and demand 
 for bills and can advise his clients accordingly. As the factors regu- 
 lating the supply and demand are constantly changing he has to keep in 
 close touch with the market and with his clients. 
 
 Canadian banks and brokers are kept constantly informed by wire 
 of the rates ruling in New York, which are applicable to Canada after 
 the discount or premium obtaining on New York funds has been allow- 
 ed for. 
 
 The usual broker's commission is about $5 per £10,000 on sterling 
 exchange and 1/64 of 1% on Continental exchanges. 
 
 The principal exchanges quoted in the New York market are given 
 below, together with the equivalent Canadian quotation after allowing 
 for 1/16 of 1% discount on New York funds. The alternate quotations 
 
26 
 
 Notes un Fukeiux Exchaxge. 
 
 for sterling on the old par of exchange and the cent quotations for 
 marks and francs are also shown. 
 
 
 New York 
 
 Canada, Less 
 1 16 of 1% 
 
 Alternate 
 Ql'otation 
 
 London: 
 
 $ per £, Stg. 
 
 
 Old par , 
 
 
 Cable 
 
 4 8575 
 
 4.8545 
 
 9 3 16 + 1 32 
 
 
 Demand 
 
 4.8525 
 
 4.8495 
 
 9 1/16+3/64 
 
 New York funds being 
 
 Commercial 
 
 
 
 
 at jL discount, the 
 
 60 days 
 
 4.8200 
 
 4.8170 
 
 8 3/8 
 
 Clanadinn rate i.s arriv- 
 ed at by deduding Jg 
 
 Bankers 
 
 
 
 
 of 1% from the rate. 
 
 60 davs 
 
 4.8225 
 
 4.8195 
 
 8 7/16 
 
 
 * 
 
 
 
 Cables are 8 davs' in- 
 
 Berlin: 
 
 Cent 8 per 4 Marks 
 
 
 Cts. per Mrk 
 
 . terest more t' h a n 
 demand according to 
 
 Cheque 
 
 94i,l 
 
 94f 
 
 .2365625 
 
 steamer. sailings. 
 
 60 days' rates are 61? 
 
 Amsterdam: 
 
 Cents per Florin 
 
 
 
 days' interest and 
 
 Checiue 
 
 40.04 
 
 40.0U 
 
 .40 + 1/32 
 
 stamp f.OOLM) less than 
 demand. 
 
 Hongkong:* 
 
 Cents per Mex. % 
 
 
 
 
 Cheque 
 
 49. 
 
 48.97 
 
 - 
 
 
 
 
 
 Cts. per Fc. 
 
 The Canadian rate is 
 
 Paris: 
 
 Fee. per.? 
 
 
 arrived at by addinp 
 
 Cable 
 
 5.20 5 8 
 
 5.20 5 8- 1 16 
 
 .191956 
 
 ^f, to the New York 
 
 >■ Iraiicrateor dcducthui 
 
 rV from the dollar 
 
 Cheque 
 Commercial 
 
 5.20 5 8—1 32 
 
 5 20 5 8— 3/32 
 
 .191896 
 
 
 
 
 value. 
 
 60 days 
 
 5.24 8/8— 1 ''32 
 
 5.24 3/8—3/32 
 
 .190524 J 
 
 
 Exchange quotations are peuerally given in newspapers in two columns, the 
 first column (b) giving the price offered by buyers, and the other column (s) 
 giving the sellers' price, one expressing the demand and the other the supply. 
 B gives the lowest quotation, the buyers naturally offering a price as low as 
 possible, -while the sellers try to obtain the highest price, but the real or trading 
 quotation is generally somewhere between the two. There are two classes of 
 quotations, the posted rate, which is used principally for small amounts, and the 
 actual rate, or wholesale rate, used between bankers and brokers for large trans- 
 actions. As a rule, however, the rate for very large transactions is a matter of 
 individual negotiation owing to the frequent change in conditions during the 
 day, and the rates are seldom announced in time to be of much use except to 
 show the general trpud of exchange. 
 
 EXCHANGE TABLES 
 
 14. Exchange Tables. — Exchange tables like interest tables are most 
 convenient and useful tools, and though formidable in appearance, with 
 their serried columns of figures, they are simple in operation and their 
 compilation is merely a matter of multiplication. 
 
 All excliange tables give the same information, though some give it 
 in greater detail than others — the number of foreign nnits for so many 
 dollars and the nu)nbcr of dollars for so many foreign units, at various 
 rates. As an example we will compile a brief franc table for the rate 
 
 *See page 67. 
 
The Principles of Exchange 
 
 27 
 
 5.16-7/8. This of course represents the value in francs of a dollar and 
 we must now find the value of 1 franc by division — ^ijj^gTj^^ =.,1934704. 
 We are now ready to compile our table as follows. 
 
 Francs. Dollars. 
 
 1 1934704 
 
 2 3869408 
 
 3., 5804111 
 
 4 7738815 
 
 5 9673519 
 
 6 1.1608223 
 
 7.. 1.3542926 
 
 8 1.5477630 
 
 9 1.7412334 
 
 Dollars. Francs. 
 
 1 5.168750 
 
 2 10.337500 
 
 3 15.506250 
 
 4 20.675000 
 
 5 25.843750 
 
 6 31.012500 
 
 7 36.181250 
 
 8 41.350000 
 
 9 46.518750 
 
 By continued multiplication of the top lines, this table can be 
 extended indefinitely, but the above is sufficient to find the equivalent 
 of any sum up to 1,000,U00 francs or dollars. 
 
 890 francs at 5.16 7/8 is found as folloAvs.* 
 
 800 f]-ancs=$154.78 
 90 francs= 17.41 
 
 $172.19 
 
 Our next table would be at the rate of 5.17^ (or .1932367), or if 
 we desire a closer quotation 5.16 7/8 — 1/64 (.1934401), and so on for 
 every quotation likely to be required. 
 
 Franc (piotations range from about 5.10 to 5.30, advancing by 5/8th 
 centimes.! Mark ({notations range from 92 cents per 4 marks to 98, 
 advancing by 1/16 of a cent.t Closer quotations for either the franc 
 or the mark are made in the form of fractional additions or deductions 
 from the dollar value. Sterling- quotations range from 4.75 to 4.95, 
 advancing by jf^ ths of a cent per pound or, as it is called, 5 pts. per 
 pound. 
 
 The exchange rates on all other countries are shown below. Atten- 
 tion is called to the continuity of the rates starting Avith 18 cts. for the 
 
 *Tn all exchanse conversion, whether by table or otherwise, it is an excellent 
 plan to verify results by mental calculation on a basis of $5 to the pound, 5 francs 
 to the dollar, 25 cents to the mark and so on. This ensures the accuracy of the 
 decimal point, and forms a rough check. Thus 890 ^ 5 francs = $178. 
 
 tSee Section 35. 
 
 JSee Section 42. 
 
28 
 
 Notes on Foreign Exchange. 
 
 franc up to 53 cts. for tlio roii])lc. The quotations advance by steps 
 of one lniii(]i-(Mllli of a cent or .01 cents, thus 18.01, 18.02, 18.06 and so 
 on. 
 
 Country 
 
 Unit 
 
 P.\R Value 
 IN Dollars 
 
 Ordinary 
 Range 
 
 Profit per 
 
 $1,000 
 
 Latin Union 
 
 Franc 
 
 .193 
 
 18 to 20 cent? 
 
 51.8 cents 
 
 Austria-IInngat y 
 
 Crown 
 
 .203 
 
 20 to 22 " 
 
 49.2 " 
 
 Germany 
 
 Mark 
 
 .238 
 
 22 to 25 " 
 
 42. " 
 
 Scandinavian U. 
 
 Crown 
 
 .263 
 
 26 to 28 " 
 
 37.3 " 
 
 Holland 
 
 Florin 
 
 .402 
 
 39 to 41 " 
 
 24.9 " 
 
 INIexico 1 
 
 Silver | 
 DollarJ 
 
 fluctuating 
 
 1 
 
 
 South America > 
 Asia J 
 
 41 to 50 " J 
 
 99 " 
 
 Japan 
 
 Yen 
 
 .498 
 
 50 to 53 " 
 
 19. 
 
 Russia 
 
 Rouble 
 
 .515 
 
 50 to 53 " 
 
 19. 
 
 Great Britain 
 
 Pound 
 
 4.866 
 
 4.80 to 4.90 
 
 02. 
 
 The last column shows the profit made on $1,000 for every .01 
 cents advance, the profit on 1000 foreign units being of course ten 
 cents for each advance of .01 cents in the (luotation.* 
 
 BILLS OF EXCHANGE OR DRAFTS 
 
 15. Bills of Exchange or Drafts. — A bill of exchange is an uncon- 
 ditional order in writing addressed by one person, the drawer, to 
 anothci', the drawee, signed by the drawer and requiring the drawee 
 to pay on demand (or at a fixed or determinate future date) a sum 
 certain in money to (or to the order of) a specified person, or to 
 bearer. This is the universally recognized definition of a bill of 
 exchange. The wholesale transactions of the world arc effected by 
 bills of exchange and they constitute the most important circulating 
 medium of both national and international finance. There is prac- 
 tically no difference between a bill of exchange and a draft, but the 
 former term is commonly applied to an order for payment in a foreign 
 country while the latter refers to inland bills. 
 
 If a bill of exchange is drawn for the value of goods exported and 
 a bill of jading and insurance cei'tificate, etc., are attached, it is known 
 as a documentary bill of exchange .iiid instructions nre attached to 
 suneiKh'r the documents on payment (D T) or on acceptance (D A). 
 If no doeunuMits are attached it is known as a clean bill of exchange. 
 Bills of exchange and the accompanying documents, if any, are usually 
 
 *Tho best tables for general use are "Foreign Exchange Tables," by E. D. 
 Davis, ]\[innon]>olis, ' and "Foroi^n Exchange Exjilained and Simplified," by 
 George X. Brooks, Chicago. Both these books cover the whole range of the 
 foreign exchanges, but the former is particularh- adapted for large transactions 
 requiring the use of close frai-tional quotations. 
 
The ruiNciPLEs OK P]xchange 29 
 
 drawn in duplicate, the originals being forwarded on first^ outgoing 
 steamer and the duplicates by the next. 
 
 Sometimes the second l)ill of exchange is retained until a satis- 
 factory sale can be made, in which case the maturity of the bill is 
 based on the date that the first of exchange was accepted in London, 
 accuratel}^ determined by the arrival of the mail boat. The second 
 bill of exchange bears the name and address of the holder of the 
 accepted bill and before payment the two are attached, thus becoming 
 one bill. A bill of exchange may be taken up any number of times 
 before it is due and be put into circulation between each payment, but 
 once it is paid by the acceptor on its becoming due it cannot again be 
 put into circulation. 
 
CHAPTER in. 
 A DAY IN AN EXCHANGE BOX 
 
 PRACTICAL EXCHANGE 
 
 16. Practical Exchange. — By far the best way to obtain an insight 
 into the practical working of exchange is to study actual counter 
 operations. Many of us have had an opportunity of watching ex- 
 change transactions, and perhaps assisting in them, in one of the big 
 city banks, but for the benefit of those who have not we will examine 
 a few of these transactions in detail. 
 
 We have already seen in Section 13 how the rates are obtained 
 from New York, and we will use the quotations there given in our 
 operations, and consider them as the cost price to us of the various 
 exchanges. 
 
 Buying Selling 
 
 4.8722 
 4.8277 4.8695 
 4.8111 
 
 5.193^ 
 19.30 cts 
 
 94% 
 49.20 
 
 In the examples the allowance made for profit is, of course, 
 nominal, and in the case of sterling rates the old par of exchange quota- 
 tions are used as well as the dollar rate, as the former method is still 
 in use for counter transactions. The explanations are necessarily 
 brief, and reference should be made to the fuller explanations given 
 elsewhere. 
 
 In practice the conversions are, of course, arrived at with the 
 assistance of exchange tables, but as a matter of interest the actual 
 working of conversion is shown in a few examples. 
 
 DEMAND STERLING, ETC. 
 
 17. Demand Sterling, etc. — Our first customer is Mr. Bryant, who 
 wants to send £420 to London, we quote him 9/\; (4.8695) and ask 
 him to fill uj) and sign a requisition form. This form should be used in 
 connection with the sale of every kind of draft, foreign or domestic, 
 as it eliminates the risk of misspelled names and other errors. 
 
 Great care should be taken in filling out the draft, avoid wide 
 spacing, and make the figures plainly thus £420 = . Write the amount 
 on a single line if possible, commencing at the extreme left. Write 
 the shillings and pence in full if there are an}-. Ne\er use fractions of 
 a penny. Cheques in England are commonly written with the shilling 
 sign /, thus 7/2 meaning seven shillings and two pence, but the former 
 method is safer. 
 
 *Cost to branch. 
 
 London 
 
 Bulletin* 
 
 Cable 
 
 4 . 8545 
 
 Demand 
 
 4 . 8495 
 
 60 days 
 
 4.8170 
 
 Paris 
 
 
 Cheques 
 
 5.20^-j\ 
 
 Cheques 
 
 19.19 cts 
 
 Berlin 
 
 945^ 
 
 Hong Kong 
 
 49 
 
A Day in ax Exchange Box 31 
 
 By the exchange tables we find that Mr. Bryant must give us a 
 cheque for S2,045. 19. 
 
 Conversion: — To reduce the old par quotation 109j'\; to the dollar 
 quotation we multiply it by 4^ = 109. 5625X4% = $48694* or $4,8695. 
 
 4.8695x420 = 12,045.19. 
 
 Mr. Meyers, a lawyer, now makes a requisition for the equivalent 
 of $1,000, a legacy he has to remit to England, for which we give him 
 a draft for £205-9-7, which is at the rate of 9^ ($4,86|). 
 
 Cowz/emow.-— 109.50x2/45 = 4.86| = ^^ = £205.48 = £205.9s.7d. 
 
 Mr. Meyers has also to cable £1,000 to one of his clients in Lon- 
 don, for which we require explicit instructions on the requisition re- 
 garding the name and address of the payee, etc. We charge 9^ 
 ($4.8722|) and, in addition, the cost of the cable message — $2.00, 
 making a total of $4,874.22. Great care should be taken in coding 
 the cable and it should be checked by another officer re-coding it. 
 The message should be advised to the London correspondent in plain 
 English, a copy of a message itself in code should never be sent. 
 
 The Manager now hands in a requisition in favour of the Blank 
 Bank of Canada. This represents the sale of £10,000 at the whole- 
 sale or market rate of 4.8515 (93^+1/32). The draft when made out 
 is deliv^ered to the purchasing bank and a cheque is received for 
 $48,515, a profit of tw^enty dollars. 
 
 STERLING PURCHASED 
 
 18. Sterling Purchased. — Mrs. Ellen Smith brings in a crossed 
 cheque* for £180, which we place to her credit at SV^ (4.8277,') 
 realizing $869. The cheque is payable to the order of Mrs. John 
 Smith, and as the English banks are very particular about the en- 
 dorsement being exactly the same as in the face of the cheque, we ask 
 Mrs. Smith to sign it "Ellen Smith, wife of John Smith." Should it 
 be payable to Mrs. Ellen Smith it should be endorsed "Ellen Smith" 
 the "Mrs." being disregarded. Endorsements on foreign cheques or 
 drafts should never be stamped, always written. 
 
 *A cheque is crossed by drawing two parallel transverse lines across 
 its face, with or without the words "and Co." This constitutes a "general 
 crossing" and the bank on whom it is drawn must pay it only through another bank, 
 or receiv-e it on deposit direct from the payee. If the name of a particular bank 
 is written between the lines, the cheque is "crossed specially" and can only be 
 paid through and to that bank. If the holder of a crossed cheque is a customer 
 of the drawee bank, the latter must not pay cash, but may credit the customer's 
 account, and the latter can withdraw the amount by cheque if he so desires. 
 
 The crossed cheque is not used in Canada, though it is authorized by the 
 Bills of Exchange Act (Sec. 168-175). In England, however, where identification 
 is not so strictly enforced by the banks, the object of crossing cheques is to prevent 
 their payment to the wrong holders. 
 
32 Notes on Foreign Exchange. 
 
 Sangster & Company, produce dealers, offer a 60 day sight 
 draft for £2,000 againsi a shipment of cheese, with documents attached 
 to be surrendered on payment (D/P), which we place to their credit, 
 after seeing that all the papers are in order and properly endorsed, 
 the rate given is S14 (4.81 11 J) and they realize $9,622.22. ' 
 
 Attached to the draft, which is made in duplicate, are: — 
 Marine Bill of Lading (in duplicate) 
 Certificate of. insurance for £2,150 
 Letter of Hypothecation* 
 
 Before mailing, we endorse all documents by written signature 
 to the order of our London correspondent, retaining the duplicate 
 draft and Bill of Lading to send by next mail. 
 
 FRENCH EXCHANGE 
 
 19. French Exchange. — The first customer for French exchange 
 wants a draft for Fes 300.25, which we sell him at .1930 and receive 
 $57.95. (These rates advance 19.30 cents, 19.31 cents, 19.32 cents, 
 etc., a fluctuation of .01 amounts to about 52 cents on $1,000). 
 
 We are careful to write out the date in words, otherwise a cheque 
 would be treated as a bill and taxed accordingly. 
 
 The body is filled in as in dollar cheques, and the memorandum as 
 Fes 300.25. 
 
 The next requisition is for a draft on Paris for Fes 5,000 at 5.19^. 
 When francs are quoted this way, so many francs for one dollar, we 
 decrease the rate in selling; in other words we buv high and sell \o\v. 
 Paris funds cost us 5.205^-3/32 or $959.48 for Fes 5,000, if we sell 
 at 5.193^ we will receive $962.69 and make a profit of $3.21. 
 
 If we quoted 5.20 we would receive $961.53, a profit of $2.05. 
 
 Conversion: ,^^^^^ = $962.69. 
 o.l9| 
 
 A decrease in the rate ^g centimes corresponds to a profit of 
 3^8 of 1% on the dollar amount. 
 
 For conversion with fractional quotations see Section 35. 
 
 GERMAN EXCHANGE 
 
 20. German Exchange. — Mr. Jenkins wants to send marks 1,000 to 
 
 his daughter in Berlin, for which we charge him $237. 19 at the rate of 
 94 J^ cents per 4 Marks. 
 
 *A Letter of Hypothecation is a certificate attached to a documentary bill 
 of exchange, signed by the drawer which describes the nature of the shipment, 
 etc., and states in effect (1) that the Bill of Lading is lodged as collateral security 
 for the acceptance and payment of the draft, (2) that in case of dishonour the 
 holder is authorized to dispose of the goods and apply the proceeds towards pay- 
 ment of the draft and expenses incurred, (3) that the drawer holds himself liable for 
 any deficiency, and agrees to pay same on demand. When an exporter sells a 
 number of bills of exchange to a bank, a general or blanket hypothecation cer- 
 tificate is given to apply to any or all bills of exchange purchased from him. 
 
A Day in an Exchange Box 33 
 
 Conversion: •^^^"-^ = .2?,l\^lb per Mark 
 or $237.19 for Marks 1,000. The draft should be filled out in marks 
 avoiding odd pfennige. See that the draft reads pay "out of money 
 at our credit" or "out of balance" or words to that effect as other- 
 wise it will be subject to stamp taxes of 1/20 of 1% the same as Bills 
 of Exchange. 
 
 German exchange is also quoted at so many cents to the Mark, 
 advancing by steps of .01 cents, 24.01, 24.02, etc., and a fluctuation of 
 1 cent means about 42 cents on $1,000. The conversion requires 
 no explanation. An advance of Y^c per 4 Marks corresponds roughly 
 to y^ of 1% on the dollar amount. 
 
 SUNDRY DRAFTS 
 
 21. Sundry Drafts. — Won Lung, who by the way is a very close 
 figurer on exchange rates, wants a draft on Hong Kong for Loc. Cur. 
 $100 for which Ave quote him 49.20 for each Mexican or local currency 
 dollar as it is called. His draft therefore costs him $49.20. In 
 making out drafts on Hong Kong, care should be taken not to omit 
 the words Loc. Cur. $100, and in the body, One hundred dollars Local 
 Currency, avoiding cents, if possible. Drafts on Hong Kong are 
 generally made out to bearer so there is considerable risk in their use 
 to the remitter. 
 
 If Won Lung had asked for the equivalent of $100 in local cur- 
 rency he would have received a draft for Loc. Cur. $203. or .^Vo 
 
 Belgium, Switzerland and Italy are members of the Latin Union, 
 and their monetary system and quotations are similar to that of France, 
 with the exception that the Franc in Italy is called the Lira (plural 
 Lire). There is very little demand for drafts on other countries of 
 Europe, and then only for small amounts for individual use, as large 
 transactions are preferably settled by means of drafts on the big 
 centres, London, Paris or Berlin and exchange on these points generally 
 commands a premium in other European cities. 
 
 The money orders of the Canadian Bankers' Association are 
 largely used for small remittances to Great Britain and the United 
 States. They are limited in amount to fifty dollars each, v^'hichieditnve 
 should never be overlooked. 
 
 They are payable at points all over Canada (except the Yukon) 
 and an endorsement shows the different correspondents in Great 
 Britain and the United States where they can be cashed. In the 
 former they are paid at a fixed rate of $4.90 per pound sterling (when 
 a fixed rate of exchange is endorsed on a cheque or draft it is called a 
 tel quel rate.) 
 
 FOREIGN MONEY ORDERS, ETC. 
 
 22. Foreign Money Orders, etc. — Foreign Money Orders are a cheap 
 and convenient means of remitting small sums of money to any part 
 or the world. They are usually drawn in pounds sterling, the maxi- 
 mum amount of any one Order being limited to £25. For remittances 
 
34 Notes on Foreigx Exciiaxge. 
 
 in excess of that amount it is cheaper and more convenient to purchase 
 an ordinary bank draft. 
 
 The body of one of these money orders reads as follows: 
 
 "The Banks mentioned hereon will pay to the order of 
 
 the sum of or its 
 
 equivalent in the currency of the countr>- in which it is presented." 
 
 It is addressed to the London office or correspondent of the issuing 
 bank and signed by the Manager and Accountant, while below it 
 bears this note: 
 
 "If presented in the sum of 
 
 will be paid without deduction except for stamps." 
 where the equivalent amount of foreign money can be filled in if 
 the remitter desires the order to be for a specific sum in a certain 
 currency. There is also printed on the face a list of the correspondents 
 at the principal towns in a score or more countries where it will be 
 honoured at the current rate of exchange. 
 
 The remittances of immigrants to their relatives and friends 
 in their home countries are increasing every year and for this purpose 
 the foreign money orders and the mail remittances (referred to below) 
 are most useful. The former can be used where the payee is resident 
 in any of the cities mentioned on the money order, or in a town where 
 there is a regular bank, but for all other points a mail remittance should 
 be used. 
 
 Mail Remittances to Foreign Countries: — By this system 
 a Canadian bank requests its chief correspondent in (say) Russia or 
 Austria to pay a certain sum to a specified person in that country, 
 enclosing at the same time a draft to cover the amount involved and the 
 correspondent's commission. Immediately on receipt of this letter 
 the correspondent forwards the equivalent of the amount in local 
 currency to the beneficiary by registered mail, post office order, or 
 through its agents in the town where the beneficiary resides. The 
 mail remittance form is usually arranged in four perforated sections, 
 namely : 
 
 1. A letter of advice giving full instructions which goes 
 forthwith to the correspondent witli I he covering draft. 
 
 2. Receipt for the remitter which he retains. This is not 
 negotiable. 
 
 3. Notice for the payee, which is also handed to the remitter 
 for transmission to the beneficiar}-, gi\ing the name of the cor- 
 respondent and containing the following notice in a dozen different 
 languages: — 
 
 "If the above amount is not recei\ed within ten days send 
 
 this slip with your exact address to the " (name 
 
 of correspondent in foreign countr\-). 
 
 4. Stub on which a record of particulars of the transaction is 
 made. 
 
A Day in an Exchange Box 35 
 
 LETTERS OF CREDIT 
 
 23. Letters of Credit — The next customer is Mr. Brown, who intends 
 to visit Europe and asks us to arrange his finances for the trip. He 
 requires a letter of credit for £1,000, travellers' cheques for $500 
 and £10 in sovereigns. 
 
 Travellers' cheques though sold and payable in dollars (in 
 denominations of $100, $50, $20 and $10) are payable in the principal 
 foreign countries for the full fixed amounts in foreign currencies printed 
 on the face of the cheques without deduction for commission. In the 
 colonies which use the same currency as their mother countries, the 
 cheques are payable at the current rate for purchasing exchange on 
 the capitals of the respective mother countries. 
 
 Travellers' cheques may be cashed practically anywhere and are 
 self-identifying and easily negotiated. Mr. Brown pays $502.50 
 (3^ of 1% commission) and receives: 
 
 1. A book of cheques of the denominations he requires. 
 
 2. A list of correspondents, hotels, etc., who will cash the 
 cheques. 
 
 3. A letter of indication which he signs in our presence 
 and which is used by the correspondents to compare with the signa- 
 tures on the cheques when he obtains the cash. This letter 
 also contains the numbers and amounts of the cheques. 
 
 Some banks do not use a letter of indication but require the 
 signature of the customer to be placed on each cheque before issue. 
 In this way every cheque carries its own identification but the risk 
 is greater. 
 
 For the sovereigns we charge par S48.67, making a total of $551.17. 
 
 We now come to the circular letter of credit and give Mr. 
 Brown : 
 
 1. The letter itself for £1,000. 
 
 2. A letter of indication bearing his signature, and 
 
 3. A list of correspondents from whom money may be drawn. 
 
 Mr. Brown signs an agreement that any cheque he draws against 
 the credit shall be charged to his account at the current rate of the day 
 when presented to us for redemption, plus a commission of 1%. If of 
 high financial standing this agreement is sufficient, as there would 
 always be funds in his account to meet the withdrawals, otherwise 
 we would require cash or securities to be deposited to the amount of 
 the liability. 
 
 Our next visitor is Mr. Jackson, from London, Eng., bearing a 
 letter of credit from a well-known London bank, one of our correspon- 
 dents. He presents his letter for £500 and a letter of indication, with 
 a request for £10. We first see that the letter is in form in regard 
 to dates, etc., compare it with the sample form and signatures of our 
 correspondent on file, and add up the endorsements to see that there 
 
36 Notes on Foreign Exchange. 
 
 is a sufficient balance to meet the proposed withdrawal. Everything 
 being in order we — 
 
 1. Carefully endorse on the back of the letter the date and 
 amount withdrawn accompanied by our own name. 
 
 2. We fill in a sterling draft, which Mr. Jackson signs, for the 
 amount in strict accordance with the instructions contained in the 
 body of the letter of credit. 
 
 3. We then pay Mr. Jackson the equi\"alent of ,^10 at the 
 rate of the day, say $48.20. 
 
 Letters of credit are sometimes fraudulent and great care should 
 be taken in comparing them with the original cop>' and signatures. 
 In the hands of private indi\iduals they are only intended to pro\"ide 
 funds from place to place and any withdrawal of an unusual proportion 
 of the face amount should be viewed with suspicion, unless some 
 satisfactory explanation can be given, such as the purchase of tickets 
 for the homeward journey, etc. The letter of credit form should 
 be attached to the ftnal draft when the withdrawal exhausts the credit. 
 
 Our customer, Mr. Brown, in using his letter of credit in foreign 
 countries will be treated similarly to Mr. Jackson. 
 
 We next have presented to us a travellers' cheque for .$100. 
 We ask for the letter of indication and request that the cheque be 
 signed in our presence by the holder. After comparison of the signa- 
 ture and numbei' of the cheque with the letter of indication we pay 
 the exact amount of the cheque, $100. By arrangement with the issu- 
 ing bank we are entitled to 10 cents for our trouble which we add to the 
 cheque and forward the item for redemption as $100.10. 
 
 COMMERCIAL LETTERS OF CREDIT 
 
 24. Commercial Letters of Credit. — Smith & Company, tea merchants 
 (Montreal), next apply for a commercial letter of credit on London 
 for ^10,000 in favour of Napier & Company. Colombo, Ceylon, tea, 
 merchants. The first thing to determine is Smith & Compan}-'s 
 financial standing and business experience. It is true that any 
 transactions against letters of credit are protected by bills of lading 
 and insurance, but it must be remembered that there are many risks 
 in the import business, especially when from some distance, in the 
 way of shrinkage in market \alue, loss in weight and depreciation, so 
 that the financial position of the consignee should provide ample 
 margin for such contingencies. 
 
 If the financial standing of Smith & Co. is satisfactory we ask 
 them to sign an application for a commercial letter of credit 
 setting forth the particulars and terms of the shipment and giving 
 instructions in regard to insurance, etc., all of which are embodied 
 in the letter of credit addressed to Napier <S: Company. This 
 letter is handed to Smith & Company to forward with instructions, 
 and they in return give us a receipt in which is incorporated an agree- 
 ment regarding the basis on wdiich the bank is to be reimbursed, the 
 amount of its commission (which varies according to the currency 
 of the bills drawn) and defines the bank's rights in case of default in 
 payment or other difficulties. 
 
A Day in an Exchange Box 37 
 
 The letter of advice is forwarded to our London correspondents, 
 and a copy retained for our files. It does not necessarily follow that 
 the letter of credit will be availed of in one arnount. There will 
 probably be one or more shipments but they must all be made within 
 the time limit mentioned in the letter. 
 
 The history of one of these shipments may be interesting. We 
 will presume that the first shipment is for, say 1,000 boxes of tea, 
 £4,000 sterling. Napier & Company on receiving the letter of 
 credit from Smith take it, the draft, invoices, bills of lading and 
 insurance policies to their bank in Colombo, who endorse the amount 
 on the letter of credit and forward the draft with documents 
 attached to their correspondents in London. On reaching London 
 it is presented to our correspondents (or branch), who, after 
 accepting the draft, are handed all the documents, which they forward 
 to us in Montreal with particulars of the due date of the acceptance, 
 etc., as they look to us to provide for same at maturity. The bills of 
 lading are held until the arrival of the tea when we can either warehouse 
 it or hand it over to Smith & Company under their trust receipt 
 for speedy disposal. Ten or twelve days before the maturity of 
 the draft we call upon Smith & Company to pay the amount at the 
 current rate of exchange plus our commission. We are thus placed 
 in funds to meet the draft at its maturity when it is charged by London 
 branch or Agents to our account. 
 
 Anyone not already familiar with the forms used in both 
 commercial and circular letters of credit should' ask to be shown the 
 same. 
 
CHAPTER IV. 
 
 GREAT BRITAIN 
 
 25. Money.- — Gold monometallic standard. Monetary Unit, the 
 sovereign 123.27447 grains, 916^ fine (113cVj grains or 7.322385 
 grammes pure gold). 
 
 Gold Coins. — £5, £2, £1 (sovereign) and ten shillings or half 
 sovereign. 
 
 Guineas. — Guineas (twenty-one shillings) and half guineas are no 
 longer coined or in circulation. The term, Irowever, is still used in 
 public subscriptions and by lawyers and medical men in their fees for 
 professional services. 
 
 Silver Coins. — Crown (5/-), half crown (2 T)), florin (2 '-), shilling, 
 sixpence and threepence. One pound of standard silver (925 fine) is 
 coined into 66 shillings; a shilling therefore weighs 87.2727 grains of 
 standard silver or 80.7272 grains of pure silver.* 
 
 Paper Money. — Bank of England notes £5, £10, £20, £50, 
 £100, £200, £500, £1,000. The bank of England is authorized to 
 issue notes up to £18,450,000 without metallic cover. All issued 
 over that amount must be covered by gold pound for pound. These 
 notes are payable on demand and are legal tender for any amount 
 except at the Bank of England itself, where they must be redeemed in 
 gold. In August, 1914, the British Government issued Treasury 
 Notes for £1 and 10/-. These are also legal tender. 
 
 There are a number of banks in Great Britain outside of London, 
 which are permitted to issue notes. These notes are generally of 
 small denomination and as there is a charge for collection in London, 
 their circulation is purely local. 
 
 Legal Tender. — Gold and Treasury Notes are legal tender in 
 Great Britain to any amount, silver to the amount of £2, and 
 copper coins to the amount of Is. The sovereign, however, is not legal 
 tender when .its weight falls below 112.2921 Troy grains pure gold. 
 The Bank of England does not reissue a sovereign when it is below 
 the weight of 122.976 grains of gold and alloy. 
 
 Bank of England notes are legal tender and the Bank will exchange 
 gold coins of legal weight for Bank of England notes without delay 
 or expense. 
 
 *British quotations for bar silver are quoted so many pence per ounce standard, 
 so when silver is quoted at 2-4^2 pence per ounce, the pound standard costs 24s. (id. 
 (294 pence), which divided by 66 gives the intrinsic value of the shilling 4/y 
 pence. American quotations for bar silver are quoted so man\' cents per ounce 
 of pure silver; therefore the London quotation for bar silver at say 25 pence would 
 correspond with 25 X '("./t;" =27. 026d for 1 ounce of pure silver or in .\merican 
 money on the basis of 49. 316d per dollar, 2 ^ || ji =54. 80 cents. 
 
 The English price per ounce standard silver multiplied by the constant 
 2.192 will give the New York equivalent value per ounce of pure silver and the 
 New York price per ounce of pure silver multiplied by the constant .4562 will 
 give the English parity per standard ounce, thus 54.80 cents X .4562=25 pence. 
 25X2.192 = 54.80 cents. 
 
Great Britain 39 
 
 COINAGE OF GOLD 
 
 26. Coinage of Gold. — Great Britain coins 1869 sovereigns from 40 
 lbs. troy of standard gold 11/12 fine, and the value of an ounce of 
 Standard gold is therefore £3. 17s. lO^d. (77.87465 shillings) ; of 
 an ounce of pure gold £4. 4s. 11.45d. (84.95416 shillings); and an 
 ounce of mint or eagle gold £3. 16s. S^d. (76.458744 shillings). 
 
 The United States coins 800 gold dollars from 43 ounces of mint 
 gpld 9/10 fine and the value of an ounce of mint or eagle gold as 
 it is called, is therefore S18. 60465, of an ounce of pure goW $20.671835, 
 and of an ounce of standard gold $18.949182. These are also the 
 Canadian values. 
 
 The Bank of England pays immediately for gold at the rate of 
 77s. 9d. per ounce standard. 
 
 The Royal Mint in London and its four branches in Melbourne, 
 Perth, Sydney and Ottawa, take any quantity of gold for coinage, 
 which is free, but deliver the corresponding coins — at the rate of 
 77s. lOM. per oz. standard — a fortnight after the reception of the gold. 
 
 The difference of IJ^d corresponds to about 4% interest for 14 
 days on the ounce value. 
 
 Under normal conditions the Bank of England pays £3. 17s . 9d . per ounce 
 for standard bar gold (or at the rate of £1 for .|4.8744) and buys tjnited States 
 eagles at about £3. 16s. 4^. per ounce (or at the rate of £1. for $4.8719) but these 
 prices occasionally vary. 
 
 On August 13, 1914, the announcement was made that the Bank of England 
 was willing to purchase gold at Ottawa through the Dominion Government and to 
 pay cash in London against same at the fixed price for gold bars at 77s. 6d per ounce 
 standard and United States eagles at 76s. OJijd. per ounce. It is useful to know 
 how to arrive at the equivalent dollar rates. 
 
 In the case of standard gold, divide $18.949182 by the London price per 
 ounce in pounds and decimals of a pound. 
 
 ^ ^,1 tl^-^ ' =$4.8901 per £ sterling at £3.17s.6d. per ounce standard gold. 
 Or a rough calculation may be made by adding .0026 cents to par (.$4.8666) for 
 each half pennv decrease from 77s. lOj^od. 
 
 4. 8666 + (.0026X9) or . 0234 =$4.8900 
 For eagle or United States mint gold, divide $18.60465 by the price per ounce 
 
 i-|^|||^=.$4.8932 
 
 or add . 0027 cents to par for each half pennv decrease from 76s. S^d. 
 4 . 8666 + ( 10 X . 0027) or ' . 027 = $4 . 8936. 
 
 LONDON QUOTATIONS • 
 
 27. London Quotations. — -London has not yet adopted a uniform 
 method of quotation for foreign exchanges, some countries are quoted 
 in pence and some in foreign money. 
 
 In English money are quoted: — 
 
 South America, China, India, Russia, Portugal and Spain.* 
 
 In Foreign money are quoted: — 
 
 i\ll other foreign countries.! 
 
 *The pence pars for these exchanges will be found in column Table II. The 
 rates generally advance by steps of one sixteenth of a penny. 
 
 fThe pars for the more important countries will be found opposite Great 
 Britain in Table II. 
 
40 Notes on Foreign Exchange. 
 
 The English quotations for North American exchange were 
 formerly quoted in pence per dollar, advancing by thirty-seconds of a 
 penny. Lately, however, it has become more and more the practice 
 to use the American method of quoting dollars and cents per pound 
 sterling, which, of course, makes comparison a simple matter. The 
 old method, however, is occasionally used. 
 
 To reduce the American rate to the English quotation per dollar: .$4.8000 
 being equal tooOd. per dollar, deduct this from quotation, divide the remainder 
 by 30, the dividend thus obtained represents the number of thirty^seconds of a 
 penny to be deducted from 50 pence, to give the equivalent. 
 
 Find the pence equivalent of $4.9136 per pound sterling: — 
 
 $4.9136 = 4.8000+Hf'=50d.-ti = 48|i pence 
 $4.8066 = 4.8000+ W =50d. -|| = 49,', pence 
 S4. 8425 = 4.8000+ Vo' =50d.- .^f = 49vV, pence 
 
 This rule wih hold good to $4.9199 or 48ft pence. 
 
 AMERICAN QUOTATIONS 
 
 28. American Quotations. — Sterling rates are quoted in Canada and 
 the United States at so many dollars and cents to the pound sterling, 
 $4.85, $4,863^2 and so on. There are two methods of progression; 
 namely, advancing by eighths of a cent $4.85, $4.853/8> $4.8oJ<£, and 
 advancing by five one-hundredths of a cent per pound (00.05 cent), 
 $4.8510, $4.8515, $4.8550 and so on. The latter is, of course, the closer 
 quotation and is used in market transactions. 
 
 Canada is also using the cumbersome method of quoting sterling 
 exchange on the basis of a premium on the old par of exchange, 
 
 ($4.44;* per pound). 
 
 This latter method is now seldom used for large transactions, and 
 it is to be hoped will soon be abandoned entirely.* 
 
 PROFITS 
 
 29. Profits. — When a profit of so much per pound is desired, no cal- 
 culation is necessary. A cent advance per pound means one dollar 
 per £100 or ten dollars per £1,000; a point advance per pound (00.01 
 cents) gives ten cents on £1,000 and five points (00.05 cents) per pound 
 means a profit of 50 cents per £1,000. One-eighth of a cent advance 
 gives 123/^ cents per £100. 
 
 When the profit is figured on the dollar value it will be, roughly, 
 double the advance in the rate (4.87x2, or double the value of a 
 pound, being nearly 10.00). An advance of five points means a 
 profit of 1034 cents per $1,000, and an advance of fiftv points (say 
 $4.8500 to $4.8550) gives a profit of only $1.03 per $1,000. One- 
 eighth of a cent advance means a profit of 26 cents per $1,000. 
 
 On ordinary transactions a profit of one-eighth to one-quarter of 
 1% should be made, or from sixty points to a cent and a quarter a 
 pound, according to the nature and amount of the transaction. On 
 small transactions two or three cents per pound should be charged 
 in order to obtain a minimum. 
 
 *For conversion from old par to the dollar quotation, etc., see Appendix B. 
 
Great Britain 
 
 41 
 
 A study and comparison of the exchange tables will be found of 
 assistance, but practice is the best teacher. 
 
 In making a rate for a maturing collection drawn on Canada in 
 sterling or foreign currency, whether received direct from the drawer 
 or through another Canadian bank, care should be taken to see that 
 the rate is higher than the counter demand draft rate for the day, 
 on account of the extra work involved in collecting. The rate should 
 be sufficiently high to reimburse the collection banks for their services. 
 The drawee sometimes considers the question settled by offering in 
 payment a demand bank draft for a similar amount in sterling, which 
 is, of course, an untenable position to take. 
 
 Rule. — Buy low, sell high. 
 
 CONVERSIONS 
 
 30. Conversion. — In actual practice conversions are generally made 
 with the aid of exchange tables, but every operator should be able 
 to make the necessary calculations for himself. 
 
 Sterling currency is non-decimal: — 
 £1 =20 shillings = 240 pence = 960 farthings. 
 
 .05 = 1 shilling = 12 pence= 48 farthings. 
 
 .004^ = 1 pence = 4 farthings. 
 
 It will be found more convenient for purposes of calculation to 
 reduce all shillings and pence to the decimal of a pound.* 
 
 Decimals of £1 
 
 Shillings 
 
 
 Pence 
 
 
 1 
 
 £ .05 
 
 1 
 
 £.00416 
 
 2 
 
 .10 
 
 2 
 
 .00833 
 
 3 
 
 .15 
 
 3 
 
 .01250 
 
 4 
 
 .20 
 
 4 
 
 .01666 
 
 5 
 
 .25 
 
 5 
 
 . 02083 
 
 6 
 
 .30 
 
 6 
 
 .02500 
 
 7 
 
 .35 
 
 7 
 
 .02916 
 
 8 
 
 .40 
 
 8 
 
 .03333 
 
 9 
 
 .45 
 
 9 
 
 .03750 
 
 10 
 
 .50 
 
 10 
 
 .04166 
 
 11 
 
 .55 
 
 11 
 
 . 04583 
 
 12 
 
 .60 
 
 12 
 
 . 05000 
 
 13 
 
 .65 
 
 1/32 
 
 .00013 
 
 14 
 
 .70 
 
 1/16 
 
 .00026 
 
 15 
 
 . 75 
 
 3/32 
 
 . 00039 
 
 16 
 
 .80 
 
 1/8 
 
 . 00052 
 
 17 
 
 .85 
 
 1/4 
 
 .00104 
 
 18 
 
 .90 
 
 1/2 
 
 . 00208 
 
 19 
 
 .95 
 
 3/4 
 
 .00312 
 
 20 
 
 1. 
 
 
 
 Decimals of a pound : 
 
 To reduce shillings and pence 
 to the decimal of a pound, multi- 
 ply the shillings by .05, and the 
 pence by .004^. The reason of 
 this is apparent. 
 £1 = 1. 
 
 ls= .05 of a pound. 
 ld= .004166 of a pound or 
 .004^\ 
 
 If only an approximation to 
 the nearest penny is desired, 
 multiply the pence by .004, and 
 add one to the result if over 
 twelve, and two if over thirty- 
 two. 
 Example: 
 
 Reduce £15, 8s, 7d. to pounds 
 and decimal: — 
 
 15. 
 
 .05x8 40 
 
 .0041x7 
 
 .029i 
 
 £l5.429i 
 To reduce decimals of a pound 
 to shillings and pence, divide the 
 first two numbers by five for the 
 shillings, and the remainder by 
 four for the pence (to be exact, 
 divide by .004^ or ■^-^). 
 
42 Notes on Foreign Exchange. 
 
 Addition 
 
 £ s. d. 
 
 240. 12. 8 
 
 15. 10. 5 
 
 5. 5. 4 
 
 Mult plication 
 
 £ s. d. 
 
 215. 12. 8 
 
 4 
 
 Stibtraction 
 
 £ s. d. 
 215. 12. 8 
 212. 15. 10 
 
 Division 
 
 £ s. d. 
 4)25. 7. 7 
 
 £261. 8. 5 
 or £261.42083 
 
 £862. 10. 8 
 or £862.533 
 
 £2. 16. 10 
 or £2.8426 
 
 £6. 10. 4 
 or £6.37916 
 
 To convert English money into dollars: — 
 
 Rule. — Multiply the amount in pounds by the reite per pound. 
 £2,500 at 4.8635 = 2,500x4.8635 = 112,158.75 
 
 To convert dollars into English money: — 
 
 Rule. — Divide the amount in dollars bv the rate per pound. 
 $2,500 at 4.8635 = ^^5^305 = £514.0331 = £514. Os. 8d. 
 
 Since £15 is equal to $73 at par ($4.8666), sterling amounts may 
 be converted into dollars at par by multiplying by 73/15, and dollar 
 amounts may be converted into pounds sterling at par bv multiplving 
 by 15/73. 
 
 INTEREST AND STAMPS 
 
 31. Interest & Stamps. — The English stamp tax on bills of exchange 
 amounts to one shilling for every £100, or nearly a quarter of a cent 
 per pound (.0024). In exchange calculations an allowance for stamps 
 is made of 1/20 of 1% or 24 cents per £100. 
 
 Cheques, three day sight bills and under only require a penny 
 stamp, no matter what the amount. 
 
 The days of grace are three. There is no grace on cheques, 
 demand or sight drafts, bank post bills (issued by Bank of England) 
 or Treasury Bills. 
 
 All bills due on bank holidays are paid the day after. 
 
 Bills due on Sundays, Christmas Day or Good Friday are paid 
 the day before. 
 
 Bills due on the 31st of the month at thirty days are due on the 
 third of the following month. 
 
 Interest is calculated by taking the exact number of days and 
 the year at 365 days. 
 
 The discount rates applicable to various classes of bills are, 
 roughly, as follows: — 
 
 Clean bills drawn upon firms: — M% above private discount rate. 
 
 Clean bills drawn upon bankers: — private discount rate. 
 
 Bills with flocumcnts dcli\crablc on acceptance, ordinary cases: — 
 yi below Bank of England minimum discount rate. 
 
 Bills with documents deliverable on acceptance, drawees of 
 very good financial standing: — 1/4% above private rate. 
 
Great Britain 
 
 43 
 
 The Bank of England rate governs the rate of interest paid by 
 the London joint stock banks on deposits, the latter being generally 
 13^% below the Bank of England rate. 
 
 In cases where bills have documents attached, with instructions 
 to accept payment "under a rebate of 3^% above rate of interest 
 allowed on deposits by joint stock banks" if the bank rate were 4% 
 the deposit rate would be 23^2% and the rebate 3%. 
 
 This is known as the "retirement" rate, and the bill is said to be 
 taken up "under rebate," in order that the drawer may obtain possession 
 of the relative goods before maturity. Such bills are known as D/P bills 
 (documents on payment) and are not discounted by English banks. 
 
 Sterling Exchange 
 
 Interest Table for 
 
 use in purchasing 
 
 Bills of Exchange 
 
 Rates 
 Per Cent. 
 
 3 Days 
 
 10 Days 
 
 33 Days 
 
 63 Days 
 
 73 Days 
 
 93 Days 
 
 123 Days 
 
 Basis 
 
 $485. 
 
 $485. 
 
 $485. 
 
 $485. 
 
 $485. 
 
 $485. 
 
 $485. 
 
 1/16 
 
 1/8 
 
 1/4 
 
 .002 
 .005 
 .010 
 
 .008 
 .017 
 .033 
 
 .027 
 .055 
 .110 
 
 .052 
 .105 
 .209 
 
 .061 
 .121 
 .243 
 
 .077 
 .154 
 .309 
 
 .102 
 .204 
 .409 
 
 1/2 
 
 3/4 
 
 1% 
 
 .020 
 .030 
 .040 
 
 .066 
 .100 
 .133 
 
 .219 
 .329 
 .439 
 
 .419 
 .628 
 .837 
 
 .485 
 .728 
 .970 
 
 .618 
 
 .927 
 
 1.236 
 
 .817 
 1 . 226 
 1.634 
 
 2% 
 
 3% 
 
 4% 
 
 .080 
 .120 
 .160 
 
 .266 
 .399 
 .532 
 
 .877 
 1.316 
 1.754 
 
 1.674 
 2.511 
 3.349 
 
 1.940 
 2.910 
 3.880 
 
 2.472 
 3.707 
 4.943 
 
 3.269 
 4 . 903 
 6.538 
 
 5% 
 
 6% ...... 
 
 .199 
 .239 
 
 .664 
 .797 
 
 2.193 
 2.631 
 
 4.186 
 5.023 
 
 4.850 
 5.820 
 
 6.179 
 7.415 
 
 8.172 
 9.807 
 
 Stamps.. . . 
 
 .24 
 
 .24 
 
 .24 
 
 .24 
 
 .24 
 
 .24 
 
 .24 
 
 The above figures are calculated on the basis of $485 per £100 and 365 days per year. 
 Stamps one shilling per £100 or 1/20 of 1%. 
 
 PURCHASE OF BILLS OF EXCHANGE 
 
 32. Purchase of Bills of Exchange. — Practically all exchange business 
 in sterling is transacted by cable or by demand and sixty day bills, 
 and quotations are generally furnished accordingly. Occasionally, 
 however, it is necessary to make a quotation on some special dating, 
 such as 30 or 90 days, and examples are therefore given below. 
 
 The Canadian demand rate is obtained by adding the premium 
 on New York exchange (or deducting the discount) to the demand 
 rate quoted in New York.* 
 
 *See section 8. 
 
44 Notes on Foreign Exchange. 
 
 The following will show the difference of time between the different 
 classes of bills and the stamps required: — 
 
 3 days'sight: one penny stamp, 6 days' interest oft' demand rate. 
 15 " 1 ,'20 of 1 % stamp diitv, 18 days' interest off demand rate. 
 
 30 " 1/20 of 1% " ' 33 
 
 60 " 1/20 of 1% " 63 
 
 90 " 1/20 of 1% " 93 
 
 In all exchange transactions the rate of interest is go\erned by 
 the rate obtaining in the country where the acceptance of the bill is 
 domiciled, so that on bills drawn on Great Britain the Bank of England 
 rate and the London market rates are used in these calculations. 
 
 In addition to interest and stamps, a commission by the banks on 
 the other side has usually to be taken into consideration, varying from 
 TO to j(- of 1 per cent., but as this concerns the indi\"idual arrangement 
 of each bank with its London correspondent, it is not necessary to 
 include it in these calculations. The same remark applies to any 
 profit to be made on the transaction. 
 
 Examples showing how the rates for different kinds of bills are 
 calculated, (as a matter of convenience the calculations are based 
 on £100). 
 
 What price can be paid for: — 
 
 (a) Commercial bill on London, draft drawn payable three days 
 after sight, no documents attached ("Clean Bill") 
 
 New York rate for demand cheque on London. . $487. 
 
 Canadian premium on New York exchange, 1/32 
 
 of 1%* J^ 
 
 487.15 
 
 Stamp duty (Id) not figured 00 
 
 Discount 6 days, 3% (private rate) 24 
 
 .24 
 
 $486.91 
 Nearest commercial rate $4 . 8690 
 
 (b) Sixty days' sight draft on London bank, documents against 
 acceptance. 
 
 New York rate for demand cheque on London $487. 
 
 Canadian premium on New York exchange 1/32 
 
 of 1% JL5 
 
 $487.15 
 
 Discount, 63 days, 3^% $2.93 
 
 Stamp duty, 1/20% 24 
 
 3.17 
 
 $483 . 98 
 
 Answer $4 . 8395 
 
 *See section 8. 
 
Great Britain 45 
 
 (c) Ten days' sight draft on a merchant, documents deliverable 
 against acceptance. 
 
 New York rate for demand cheque on London S487. 
 
 Canadian discount on New York exchange, 1/64 
 
 of 1% ' 08 
 
 S486 . 92 
 
 Discount, 13 days, 3%% . .66 
 
 Stamp duty, 1/20% 24 
 
 .90 
 
 I486 . 02 
 Nearest Commercial rate $4.86 
 
 (d) Sixty days' sight draft drawn on a merchant, documents deliver- 
 able against payment, covering a shipment of perishable goods. 
 
 New York rate for demand cheque on London S487. 
 
 Canadian discount on New York exchange, 3/64 of 1% .23 
 
 Retirement rate of discount at which draft may 486.77 
 
 be retired at option of drawee under rebate. 63 
 
 days, 3% 2.52 
 
 Stamp duty, 1/20% 24 
 
 2.76 
 
 $484.01 
 
 Nearest Commercial rate $4.84 
 
 The discount rate for bills under thirty days' sight is generally higher than 
 for thirty and sixty days' sight, as the first named are of too short currency to 
 be rediscounted. 
 
 Bills drawn at over sixty days' sight also bear a higher rate of discount, as a 
 rule, than the market rate owing to the element of risk on account of the possible 
 change of rate during the currency of the bill. 
 
 Bills drawn on English points outside London are generally worth one-quarter 
 cent, per pound less than London bills on account of collection charges, etc. 
 
 Particular attention should be directed to the instructions given regarding 
 the disposition of the documents and the treatment of the bill in the event of the 
 non-arrival of the relative goods. 
 
 Bills drawn on British colonies bearing the clause "with exchange and all 
 stamp duties for negotiating bills in London" added, are usually on the same 
 footing with bills drawn on London. 
 
 Bills of exchange drawn on continental points are worth from one to two 
 cents less per pound than similar bills drawn on London, according to distance, 
 etc. If such bills, however, bear the clause "payable in London" or "in London 
 exchange" they are usually on a par with bills drawn on London, plus any extra 
 cost of postage or commission. 
 
 All endorsements must be in ink and sigfied in full as English banks do not 
 recognize stamped endorsements. Endorsement should be made exactly as 
 the face of the cheque calls for ; Airs. Ellen Smith, for instance, should endorse 
 "Ellen Smith," Mrs. John Smith should endorse "Ellen Smith, wife of John 
 Smith." 
 
46 Notes on Foreign Exchange. 
 
 In Great Britain as well as in most foreign countries, a cheque whether drawn 
 payable to bearer or order is paid without identification, reasonable caution alone 
 being used. A bank, for instance, w'ould naturally make enquiries if a tramp 
 presented a cheque for a large amount. If, however, the cheque is crossed, that 
 is, has two parallel lines drawn across its face, thus 
 
 and Co. 
 
 the bank upon whom it is drawn is directed to pay the cheque only when coming 
 through some other bank. This places upon the hank the responsibility of seeing 
 that the right person receives the proceeds of the cheque. 
 
 A cheque crossed specifically to a bank can only be paid to that bank. 
 Thus, a cheque crossed, — 
 
 Bank of Scotland, London, Eng. 
 
 must be presented through the Bank of Scotland, London, Eng. 
 
CHAPTER V. 
 THE CONTINENTAL EXCHANGES 
 
 FRANCE 
 
 33. Money. — Double or bi-metallic standard (gold, and five franD 
 silver pieces). 
 
 Monetary Unit.— The franc, .32258 grammes, 900 fine, .290322 
 grammes of pure gold. 
 
 Gold Coins. — Francs 100, 50, 20, 10 and 5. Fifty and one 
 hundred franc gold pieces are seldom seen in circulation. 
 
 Silver Coins. — 5, 2 and 1 francs, and 50 and 20 centimes. The 
 silver five franc piece weighs 25 grammes, 900 fine, or 22.5 grammes 
 of pure silver. Silver coins less than five francs bearing a date later 
 than 1863 are not current and should be rejected. The twenty 
 centimes silver piece is seldom seen in circulation. The five franc 
 silver coins known as "ecus" and bearing any date from the 1st Na- 
 poleon are receivable in any amount. 
 
 Minor Coins. — Twenty-five centimes (nickel), and 10, 5, 2 and 1 
 centimes, (copper), the five centimes piece is called a sou, and the 
 ten centimes piece two sous. 
 
 Paper Money.— Bank of France notes 50, 100, 500 and 1,000 
 francs. The Bank of France is the only bank authorized to issue 
 notes in France, one-third of its issue must be covered with metal, 
 and the balance must be covered with French rentes, or bills of ex- 
 change with at least three signatures. 
 
 Legal Tender. — The gold and silver coins (but not paper money, 
 copper coins and Italian silver coins of less than 5 lire) issued by the 
 countries comprising the Latin Union have free and unlimited circula- 
 tion at their face value. The gold pieces of Austria, Bulgaria, Rou- 
 mania, Russia, Servia and Spain are also current. 
 
 The five franc silver piece is unlimited legal tender in France 
 and her colonies. The minor bronze coins are only legal tender up 
 to the amount of five francs. 
 
 FRENCH QUOTATIONS 
 
 34. French Quotations. — -Paris quotes on a sight or cheque basis francs 
 per foreign unit or hundred units: — 
 
 London 25. 13 francs per £1 
 
 Germany 123f 
 
 Latin Union. . . 99i\ 
 
 Holland 208^ 
 
 Russia 264| 
 
 Austria 104,^,; 
 
 New York 517^ 
 
 100 marks 
 100 francs 
 100 florins 
 100 roubles 
 100 crowns 
 100 dollars 
 
48 Notes on Foreign Exchange. 
 
 / 
 
 AMERICAN QUOTATIONS 
 
 35. American Quotations. — (a) Quotations at so man\- cents to the 
 franc arc only used in minor exchange operations and drafts drawn 
 on small French towns. The conversions in this case resolve them- 
 selves into simple problems in multiplication or dixision.* 
 
 (b) Franc quotations — so many francs to the dollar, are the 
 reverse of all the usual exchange quotations, so that a higher rate 
 means cheaper or lower exchange; i.e., more francs are received for 
 the dollar. 
 
 Thus: — 
 
 $1,000 at 5.181s ^vill purchase Fes 5181.25 
 
 $998.80 at oAd,% will purchase Fes 5181.25 
 
 Franc quotations advance f of a centime per dollar or about ^ of a 
 cent per franc. It will also be noticed that the advance of ^^ of a 
 centime in the above illustration corresponds roughh- to a decrease 
 of ^ s of 1 per cent, in the dollar value. 
 
 For an ordinary transaction this advance of ^ of a centime is 
 sufficient, but in large transactions where the quotations are neces- 
 sarily close, the "shading" is effected by increasing or decreasing the 
 quotation by l/'64 of 1% etc. This plus or minus fraction does not, 
 however, appl\- directly to the rate, but means 1 64 or 1 32 of \%, etc. 
 on the amount of dollars converted at the rate of olSj^gor 520 as the 
 case may be. 
 
 Francs into Dollars at a Fractional Rate: — 
 
 Fes 1,000 at 5.18H equals $193.0037 
 
 Fes 1.000 at 5.18^8 plus 1 '64 193.0037 
 
 plus 1 64 of l^rc-. .0301 
 
 equals $193.0338 
 
 A plus fraction makes the francs cost more. 
 
 A minus fraction makes the francs cost less. 
 
 Dollars into Francs at a Fractional Rate: — 
 
 $1,000 at 5.181^ equals Fes 5181.25 
 
 $1,000 at 5.18H plus 1/64 Fes 5181.25 
 
 less 1/64 of 1% of itself.. .81 
 
 equals Fes 5180.44 
 
 Or another way: — 
 
 1/64 of 1% of $1,000 is .15^ cents which at the above rate equals 
 81 centimes, to be deducted from the franc amount as above, (t) 
 
 A plus fraction decreases the number of francs received. 
 
 .^See section 12. 
 t See footnote section 12. 
 
TlIK C'OXTINEXTAT. EXCHANGES 49 
 
 A minus fraction increases the number of francs received. 
 
 It must always be borne in mind that the fraction (plus or 
 minus) refers to the dollar amount only in any exchange quotation, 
 a plus fraction makes francs (or marks or florins) cost more dollars, 
 a minus fraction makes francs (or marks or florins) cost less dollars. 
 
 This at first sight may appear to be complicated, but a little 
 practical experience, and the assistance of the following table should 
 make it quite clear. 
 
 Francs per dollar Dollars per franc 
 
 520 plus 
 
 1/32 
 
 5.19837 
 
 520 " 
 
 1/64 
 
 5.19918 
 
 520 " 
 
 
 5.20 
 
 520 minus 
 
 1 /64 
 
 5.20081 
 
 520 " 
 
 1 32 
 
 5.20162 
 
 520 " 
 
 3/64 
 
 5.20243 
 
 520 plus 
 
 1/32 
 
 .192367 
 
 520 " 
 
 1/64 
 
 .192337 
 
 520 " 
 
 
 .192307 
 
 520 minus 
 
 1/64 
 
 .192277 
 
 520 " 
 
 1/32 
 
 .192247 
 
 520 " 
 
 3/64 
 
 .192217 
 
 From the above it will be noticed that 1/64 makes a difference 
 of .000030 in the dollars, and .00081 in the francs column. The rate 
 520^14: decreases the value of the franc by .000030 to .192277, but 
 increases the value of the dollar .00081 to Fes 5.20081. 
 
 A careful study of Table III. will be of great assistance in grasping the 
 peculiarities of the franc quotation, as it shows at a glance how the dollar value 
 decreases as the franc rate increases ; the franc at 5.10 being worth 19.6 while at 
 5.25 it is only worth 19 cents. 
 
 The centre column gives the regular quotations from 5.10 to 5.25 francs 
 per dollar advancing by ^ of a centime. 
 
 The column to the left gives the value in francs of $1,000 at the various rates. 
 It also gives the decimal values of the quotations, as 5.11J'8 equals 5.117875, 
 5^ centimes advance being .625 centimes or .00625 francs. 
 
 The decimal shown in italics under each amount in this column represents 
 1/64 of 1% on the value in francs of $1,000, to be added if the fraction is a minus 
 or deducted if the fraction is a plus, as the case may be, 3/64 of course being three 
 times this amount and so on. 
 
 A quotation of 520 plus 1/64 can easily be ascertained from this table by 
 deducting 81 centimes from Fes. 5,200 which gives Fes. 5,199.19 or Fes. 5.19919 
 per dollar. If the quotation were for 5.20 minus 3/64 it would be necessary to 
 add Fes. 2.43 (3x81) which would make the rate 5.20243 per dollar. The 
 fractions generally used are (plus or minus) 1/64, 1/32, 3/64, 1/16, though 5/64 
 and 3/32 are occasionally quoted. 
 
 The right hand column gives the value in dollars of Fes. 1,000 at the various 
 rates (it also shows the \'alue of a franc in cents to seven places of decimals). 
 The decimals in italics shown in this column represent 1/64 of 1% to be deducted 
 from or added to the amount according to the sign before the fraction. 
 
 520 plus 1/64= 520 = .1923077 
 
 plus 1/64 .0000300 
 
 .1923377 
 
 The consecutive figures shown in the column marked c/160 are constants 
 for the various rates, the numerator increasing by one unit for each J's centimes 
 advance, the denominator 160 does not change. They are useful for conversion 
 where no tables are available as they very much shorten the calculations. The 
 constant for 5.15 for instance is W^, and the constant for 5 20 is \%'l. If these 
 two are memorized the others are quickly found. 5.223^ — 5.20 = 2 3^ centimes, 
 corresponding to four advances of ^ centimes each. Four must therefore be added 
 to 832 making 836. 
 
50 Notes on Foreign Exchange. / 
 
 To convert dollars into Francs multiply the dollars by the constant: — SI, 250 
 at 522K=S1.250x836 =pc6,531.25. 
 
 To convert francs into dollars divide the francs by the constant: — Fes 1,000 
 at 522^ = i^^|j^ =$191,387,560. 
 
 The latter is worked out to six decimal places so that it can be compared with 
 the Table III., and show the absolute accuracy obtained with this constant. 
 
 CONVERSIONS 
 
 36. Conversions: — French money is decimal, and operations are the 
 same as for dollars. 
 
 Conversions with cent quotations (See Rule 4, page 7). 
 Francs into dollars:— Fes 600 at .193 = 600x.l93 = S115.80. 
 Dollars info francs:— $800 at . 192 = 800-. 192 = Fcs 4, 166.67. 
 
 Conversions w^itli franc quotations (See Rule 5, page 7). 
 
 Francs into dollars:— Fes 5,000 at 5.18^ = 5,000-5.18125 = 8965.02. 
 If the rate were 5.183^-1/64 it would be necessary to deduct 1 64 of 
 1% of 965.02 or 15 cents, and the answer would be $964.87. 
 
 Dollars into francs:— $1,000 at 5. 181^ = 5. 18125xl,000 = Fcs 
 5,181.25. If the rate were 5.183^-1/64, it would be necessary to add 
 1/64 of SI, 000 — 15^ cents or 81 centimes — ^and the answer would be 
 Fes 5,182.06. 
 
 The same result would be obtained by adding 1/64 of 1% Fes 5:181.25 to 
 itself =81 centimes. 
 
 Where the fractional rate of plus or minus is used, it applies only 
 to the amount in dollars. Therefore in converting dollars into francs: — 
 
 (a) a plus fraction means that fewer francs will be obtained. 
 
 (b) a minus fraction means that more francs will be obtained. 
 
 PROFITS 
 
 37. Profits. — When the rate is quoted at so many cents per franc, 
 an advance in the rate of one-hundredth of a cent (.01 cent) would 
 of course mean one cent profit on Fes 100, or ten cents of Fes 1,000. 
 
 Rule. — Buy low, sell high. 
 
 Fes 1,000 at. 193 would cost $193, and if sold at .1935 would 
 realise $193.50, a profit of 50 cents or nearly 34 of 1%. 
 
 An advance of .01 cent in selling corresponds to a profit of about 
 fifty cents per $1,000, or 1/20 of 1%. 
 
 $1,000 would purchase Fes 5,181.35 at .193, but at .1935 $1,000 
 would only purchase Fes 5,167.96, a difference of Fes 13.39 or $2.54, 
 representing 3<4 of 1% profit on $1,000. 
 
 When franc quotations are used, a difference in the rate of ^'g 
 centimes (.625 centime) corresponds approximately to 3^ of 1% on 
 the dollar value or 123/2 cents per $100. 
 
 Rule. — Buy high, sell low. 
 
I 
 
 The Continental Exchanges 51 
 
 Fes 1,000 purchased at 5.15-^^ would cost $193.94, and if sold at 
 5.15 would realise $194.17, a profit of .23 cents, or Y^ of 1% on 193.94. 
 If sold at 5.155^+1/16, $194.06 would be paid (193.94+. 12), and the 
 profit reduced to 1/16 of 1%. 
 
 $1,000 at 5.15^8 would purchase Fes 5,156.25, but $1,000 would 
 only purchase Fes 5,150 at 5.15, a difference of Fes 6.25 or $1.25, 
 representing a profit of Y% of 1% on $1,000. If the rate was 5.15^ 
 + 1/32, the draft would be for Fes 5,154.63 or Fes 1.61 (313^ cents) 
 profit. ^j 
 
 The profit on bills of exchange is always figured on the rate, not 
 on the amount. 
 
 Example: — 
 
 What price should be paid for a sixt}' day bill on Paris, cheque 
 rate 5.15^^8, discount rate 3%, to realise a profit of 3<4 of 1%? 
 
 Cheque rate 515.625 
 
 Interest 3%, 60 days. . .2.60 
 
 Stamp 1/20 26 
 
 Profit M of 1%. .: 1.29 4.15 
 
 519.775 or 5.20+3/64* 
 or 5.193/8-5/64 
 
 INTEREST, STAMP DUTIES, ETC. 
 
 38. Interest, Stamp dtities, etc. — The stamp duty on cheques (the 
 date of which must be written in words) is ten centimes each if pay- 
 able in the town where they are drawn, otherwise twenty centimes. 
 
 The duty on bills of exchange is five centimes per Fes 100 or 
 fraction thereof. For quotation purposes stamp duties are reckoned 
 as 26 centimes or 1/20 of 1% on $100 (fes 520). 
 
 Negotiated foreign bills are payable up to noon of the day follow- 
 ing maturity. 
 
 Cheques drawn payable in France should always be dated in 
 words in order to avoid the stamp tax. This is due to the fact that the 
 law required a cheque to be paid within eight days from date of issue, 
 otherwise it is considered a bill of exchange. As figures could be 
 easily changed, the law requires the date in writing. 
 
 Quotations for time bills drawn on France are arrived at by 
 adding the interest, stamps, etc. to the demand rate. 
 
 The interest'is calculated on a basis of fes 520. equals $100. 
 
 No days of grace are allowed and interest is. reckoned on a basis 
 of 360 days to the year. 
 
 Bills due on a Sunday or holiday are payable the day before. 
 
 *Equivalent to 5.19756 as against 5.19781, a difference of .00025, or less 
 than five cents on $1,000. 
 
 Again notice the plus fraction decreases the rate and the minus fraction 
 increases it. 
 
52 
 
 Notes on Foreign Exchange. 
 
 Documentary payment bills can be discounted with banks at the Bank of 
 France rate. 
 
 Documentary acceptance bills are usually subject to discount at the Bank of 
 France rate for the last five days and at the private discount rate for the balance 
 of the time. 
 
 Discountable bills on first-class commercial firms are discounted at the open 
 market rate. 
 
 A reduction in the discount rate of the Bank of France produces a fall in 
 the London price of long bills on Paris and also produces a rise in French exchange. 
 
 Drafts on French banks are debited to the account on receipt of the relative 
 advices. Interest on the amounts of drafts not prompth- presented is therefore 
 a source of revenue to the French bank. 
 
 Overdrafts in French accounts are expensive, as the rate of interest on debit 
 balances is usually greater than in the case of any other European account. 
 
 French bankers usually charge an extra commission for telegraphic transfers 
 to firms or persons not classified as bankers. 
 
 French Exchange Intere^ Table for Use in Purchasing 
 
 Bills of Exchange 
 
 Rate 
 
 3 days' 
 
 10 days' 
 
 30 days' 
 
 60 days' 
 
 90 days' 
 
 
 per cent 
 
 sight 
 
 sight 
 
 sight 
 
 sight 
 
 sight 
 
 
 Basis 
 
 Fes 520 
 
 520 
 
 520 
 
 520 
 
 520 
 
 
 1/16 
 
 .003 
 
 .009 
 
 .027 
 
 .054 
 
 .081 
 
 
 1/8 
 
 .005 
 
 .018 
 
 .054 
 
 .108 
 
 .162 
 
 
 1/4 
 
 .011 
 
 .036 
 
 .108 
 
 .217 
 
 . 325 
 
 
 1/2 
 
 .022 
 
 .072 
 
 .217 
 
 .433 
 
 .650 
 
 
 3/4 
 
 .032 
 
 .108 
 
 .325 
 
 .650 
 
 .975 
 
 
 1 
 
 .043 
 
 .144 
 
 .433 
 
 .867 
 
 1 .'300 
 
 
 2 
 
 .087 
 
 .289 ' 
 
 .867 
 
 1.733 
 
 2.600 
 
 
 3 
 
 .130 
 
 .433 
 
 1.300 
 
 2.600 
 
 3 . 900 
 
 
 4 
 
 .173 
 
 .578 
 
 1.733 
 
 3.467 
 
 5.200 
 
 
 5 
 
 .217 
 
 .722 
 
 2.167 
 
 4 . 333 
 
 6.500 
 
 
 6 
 
 .260 
 
 .867 
 
 2 . 600 
 
 5.200 
 
 7.800 
 
 
 Stamps 
 
 .26 
 
 .26 
 
 .26 
 
 .26 
 
 .26 
 
 
 The above figures were calculated on the basis of $100 being 
 equal to 520 francs and 3G0 days per year. 
 
 PURCHASE OF BILLS OF EXCHANGE 
 
 39. Purchase of Bills of Exchange: — -The Canadian rate is obtained 
 by deducting the premium (or adding the discount) on New York 
 exchange from the demand or other rates for francs quoted in New 
 York. The demand rate is the basis from which the rates for time bills 
 are calculated. It should be carefully noted that as the rate is given 
 as so many francs to the dollar, allowances for interest, stamp duty, 
 etc. should be added to the Canadian demand rate. 
 
The Continental Exchanges 53 
 
 The following statement shows the additions which should be 
 made to the demand rate for the various classes of bills: — 
 
 3 days' sight: 1/20% stamp duty plus 3 days' interest. 
 15 " 1/20% " " 15 " 
 
 30 " 1/20%) " " 30 " 
 
 60 " l/20%o " " 60 " 
 
 90 ' " l/20%o " " 90 " 
 
 The French official discount rate and the private discount rate 
 govern the interest on the different classes of bills. 
 
 Where quoted rates are supplemented by fractional quotations, 
 it is necessary to take these fractions into consideration in calcula- 
 ting the rates to be paid for bills, as follows: — 
 
 Percentage If minus, add If plus, deduct 
 
 fraction to rate from rate 
 
 1/64 %o Fes. .00081 Fes. .00081 
 
 1/32% " .00162 " .00162 
 
 3/64%o " .00243 " .00243 
 
 l/16%o " .00324 " .00324 
 
 Example 1. 
 
 Paris cheque rate in New York 5.183/8, premium on New York 
 funds 1/64. Bank of France rate 3%,, find the 60 day rate. 
 
 New York cheque rate 518. 125 per $100 
 
 Less premium on New York funds 1/64 ... . 081 
 
 518.044 
 
 Add stamp duty 1/20 26 
 
 Interest 60 days at 3%o 2. 60 2.86 
 
 520.904 or 520^/^-3/64 
 5 . 20904 = 5 . 2082.5 + . 00279 (3/64 = . 00243). 
 
 Example 2. 
 
 New York funds 3 64 discount, cheque rate 5183>'8— 1/64. 
 
 New York cheque rate 518.125 
 
 Add 1/64 .081 
 
 518.206 New York 
 
 cheque rate 
 Add 3/64 discount on New York funds .243 
 
 518.449* Canadian 
 
 Add Stamp duty 26 cheque rate 
 
 Interest 2.60 2.86 
 
 521.307 or 52lM-l/64t 
 
 *Practically the same result would be obtained by deducting the New York 
 discount from the rate 5. 18>^ - 1/64— 3/64 = 5. 18^s— 1/16 = 5. 184,49. 
 
 t5.2125 + . 00057 (1/64 = . 00081). 
 
CHAPTER VI. 
 THE CONTINENTAL EXCHANGES (Continued) 
 
 GERMANY 
 
 40. Money. — Gold monometallic standard. 
 
 Monetary Unit.^The mark, also known as the Reichsmark, (100 
 pfennige) 900 fine .39824 grammes or .35842 grammes fine gold. 
 
 Gold Coins. — 20, 10 and 5 marks. The German names for these 
 coins are Doppelt-krone (double). Krone, and Halbe-krone (half). The 
 last one is so small that it is seldom coined. 
 
 Silver Coins. — 5, 2 and 1 mark and 50 pfennige. These coins 
 are 900 fine and a mark weighs 5.555 grammes or 5 grammes of pure 
 silver. A 3 mark silver thaler worth about 72 cents, is also in circu- 
 lation. The 20 pfennige silver and nickel pieces have been withdrawn 
 from circulation. 
 
 Silver thalers issued by the Confederate .States forming the 
 German Empire are still current, no matter what their date of issue 
 may be. They are, however, being gradually withdrawn from circula- 
 tion. 
 
 Minor Coins. — -10 and 5 pfennige (nickel) and 2 pfennige and 
 1 pfennig bronze. 
 
 Paper Money.— Reichsbank Notes, 1,000, 100, 50, 20 and 5 marks 
 The Reichsbank is authorized to issue notes for any amount pro\'ided 
 the issue is fully covered by metal, otherwise at least 1. 3 must be 
 covered by metal, and the balance of the issue must be secured by 
 bills. The total issue, however, must not exceed 541,600,000 marks. 
 Every note issued above that limit is subject to a tax of 5% per annum. 
 Gold, silver, treasury notes and notes of other banks are considered 
 as metal. 
 
 Notes of other banks—Notes of the following banks for 100 
 marks each circulate generally throughout the empire: — 
 Badische Bank Sachsische Bank 
 
 Bayerische Bank Wuerttembergische Noten Bank 
 
 Imperial Treasury Notes. — -These notes are those issued b\' the 
 Imperial Government against the amount deposited in the Spandau 
 Fortress near Berlin as a war fund, known as "Kriegsschatz" and 
 up to the summer of 1914 ax'eraged about !is30,000,000 of gold coin. 
 These notes are called Reichs Kassenschcine or Imperial Counter 
 notes and are issued in denominations of 5, 20, and 50 marks. These, 
 up to August 1914, were redeemable in gold at any time at the Reichs- 
 bank. 
 
 Le^al Tender. — Gold, Imperial Treasury and Reichsbank notes to 
 anv amount and silver 20 marks. 
 
The Continental Exchanges 55 
 
 _ GERMAN QUOTATIONS 
 
 41. German Quotations. — Berlin quotes on an eight day basis,* marks 
 per foreign unit or hundred unit: — 
 
 London 20.453^ marks per £1 
 
 Latin Union. 81.30 
 
 Austria 85.30 
 
 Russia 216. 
 
 Amsterdam. . 168 . 70 
 New York... 4.22 
 
 per 100 francs 
 per 100 crowns 
 per 100 roubles 
 per 100 florins 
 
 per $1 
 
 AMERICAN QUOTATIONS 
 
 42. American Quotations. — (a) The quotations at so many (about 
 23.87) cents to the mark are only used in minor exchange operations 
 and for drafts drawn on small German towns. The conversions in 
 this case resolve themselves into simple problems in multiplication or 
 division. 
 
 (b) In the case of large transactions fnarks are generally quoted 
 953^ or 95^, etc. (advancing by l/16th of a cent per 4 marks) which 
 means that 4 marks are worth 95}^ or 95^, etc. cents. When this 
 method is used, it is necessary, when making calculations, to multiply 
 or divide by four, in order to obtain the rate per dollar or per mark. 
 
 For all ordinary transactions this method of quotation is sufficient, 
 but in wholesale transactions, where the quotations are necessarily 
 close, the shading is effected by increasing or decreasing the quota- 
 tions by 1/64 of 1% of the dollar amount. 
 
 Where the fractional rate of plus or minus is used, it applies only 
 to the amount in dollars. Therefore in converting dollars into marks: 
 
 (a) A plus fraction means that fewer marks will be obtained, so 
 
 deduct the fraction from the marks. 
 
 (b) A minus fraction means that more marks will be obtained, so 
 
 add the fraction to the marks. 
 
 Table IV. shows the value of $1,000 and 1,000 marks at rates varying from 
 94 to 963^ cents per 4 marks. 
 
 The right hand column gives the value in dollars of 1,000 marks. The value 
 of one mark is of course found by moving the decimal point 3 places to the left. 
 
 The figures in italics under each rate represent l/64th of 1% of the amount 
 above it, to be added or deducted according to the fractional rate. For instance a 
 rate of 96 =24 cents per mark, a rate of 96 plus 1/64 =.2400375, and a rate of 96 
 plus 1/32 = .2400750, and so on. 
 
 The column to the left gives the value in marks of $1,000, and the figures in 
 italics represent l/64th of the amount, to be deducted or added the reverse of the 
 fractional signs. For instance at the rate of 96, one dollar =4. 166 marks and at 
 the rate of 96 plus 1/64 of 1%, one dollar =4. 166666 
 
 less .000651=4.166015 
 
 and so on. 
 
 A Study of the following table will make the use of these equiva- 
 lents clear. It will be noticed that a minus sign before the fraction 
 
 *Practically a cheque or demand basis. 
 
56 
 
 Notes ox Foreign Exchange. 
 
 decreases the dollars, and increases the marks, and a plus sign before 
 the fraction increases the dollars and decreases the marks. 
 
 Marks per dollar 
 4.168620 
 4.167969 
 4.167317 
 4.166666 
 4.166015 
 4.165365 
 4.164714 
 
 Cents per 4 marks 
 96 -,\ 
 
 96-^2 
 
 96 -cV 
 96 
 
 96+6^4 
 
 96+ 3I., 
 3 
 
 64 
 
 96+;^ 
 
 Cents per mark 
 23 . 98875 
 23 . 99250 
 23 . 99625 
 
 • 24. 
 
 24 . 00375 
 
 24.0075 
 
 24.01125 
 
 The column marked ^^ .?o is the "conv'ersion constant" advancing 1 unit for 
 every Jsth. 
 
 Memorize 760 as the numerator for the quotation 95, and 768 for 96, 3200 being 
 the unchanging denominator; allow 1 for every l/8th and .50 for every l/16th. 
 95^ would therefore be represented by — A^'c— and 95 U by ^'xfwo' 
 
 To convert marks into dollars, multiply the amount in marks by the constant- 
 
 Thus: 
 
 1600 marks at 95 11/lOth = ^- ^^"j"''^- ^^ =S382. 75. 
 
 Thus 
 
 To convert dollars into marks divide the amount in dollars by the constant- 
 
 1,000 dollars at 95 11 / 16th = M ^^'^'^^Q =4,180.2743 marks. 
 
 765. 50 
 
 Note that 800 divided into the numerator of the constant will give the decimal 
 equivalent of the rate— 
 
 765. 50 
 
 Thus: 
 
 800 
 
 = 95.6875. 
 
 CONVERSIONS 
 
 43. Conversions. — As Germany uses the decimal system additions, 
 subtractions, etc., are performed in the same manner as for dollars. 
 
 To convert marks into dollars. — Rule — multiply the amount in 
 marks by the rate in cents. 
 
 3,000 marks at .238 per mark = 3000x.238 = $714. 
 
 7"o convert dollars into marks. — Rule — -Divide the rate into the 
 amount in dollars. 
 
 S714 at .238 = 714^.238 = 3,000 marks. 
 
 The same ruies apply wiien the special quotation of cents per 
 four marks is used', care, however, must be used to divide by four when 
 converting marks into dollars and multiply by four when converting 
 dollars into marks. 
 
 (a) Marks 1,466 at 95i^ = ^^AMJL.flAo = UJAA3=$350. 
 
The Continental Exchanges 57 
 
 (b) $350 at 953.^ = 4(350^.955) =366.492x4 = Mks. 1465.968. 
 
 The same result would have been obtained by dividing the rate 
 by four in the first place and multiplying or dividing by .23875, the 
 rate per mark. 
 
 In converting marks into dollars when fractional rates are used, 
 find the amount in dollars at the clean rate as in (a), then add or de- 
 duct the fraction, as the case may be, to or from the amount. 
 
 Marks 1,466 at 953/^ = $350 (See example (a). 
 
 Marks 1,466 at 953^+1/32 = 1350+. 11 (1/32 of 1% of $350) =$350.11 
 
 Marks 1,466 at 953^ -1/32 = $350 -.11 =$349.89 
 
 In converting dollars into marks you reverse the fractional signs 
 plus or minus: — 
 
 (c) $349.89 at 953^ less 1/32 = 349.89 plus 1/32 of itself = 
 
 349.89x.ll = $350. 
 
 (d) $350.11 at 953/^ plus 1/32 = 350.11 minus 1/32 of itself = 
 
 350. 11 -.11 =$350. 
 
 We can then proceed as in example (b) and reduce $350 to Marks 
 = Marks 1,465.97. 
 
 Another Method: — • 
 
 $1,000 at 953^ = 1,000- ^V'i= 238 iTf = Mks. 4199.475 
 
 $1,000 at 9514+1/32 = Mks 4199.47 less 1/32 of 1% or 1.31 Marks = 
 Mks. 4198.16 
 
 Another Method: — ■ 
 
 The same result would be obtained by adding the fraction to the 
 dollar value before division:— 
 
 .238125+1/32 of l% = .238125 + .0000744 = . 2381994 
 $1,000-. 2381994 = Marks 4198.16 
 
 The reason of this is obvious: the fraction increases the price per 
 mark, consecjuently $1,000 will purchase less marks at the fractional 
 rate. 
 
 PROFITS 
 
 44. Profits. — When the rate is quoted in cents per mark, a fluctuation 
 of .01 cents amounts to about 42 cents per $1,000: 38 of 1% profit 
 would be represented by .03 cent advance. 
 
 $1,000 at 24 =4166.67 
 1,000 at 24.0 3 = 4161.46 
 a gain of Marks 5.21 or $1.25 on $1,000 
 
58 Notes ox Foreign* Exchange. 
 
 When the quotation is cents per 4 marks an increase in the rate 
 of 3^c (96 to 96}/^ )corresponds roughly to 3^ of 1% in the dollar amount 
 
 $1,000 at 96 =4166.67 
 1,000 at 963/^ = 4161.25 
 
 a gain of 5.42 or SI. 31 per $1,000 
 
 If it is desired to make an exact profit, take the percentage on the 
 rate itself. 
 
 Rate . 96 
 
 Profit, Hoil% .0024 
 
 . 9624 per 4 marks or 24.00c. per mark 
 
 $1,000 at 96 4166.67 
 
 1,000 at 96.24 4156.28 
 1,000 at 9634 4155.84 
 
 at 96.24 a profit of 10.39 marks or $2.50 is made, and at 963^ a profit 
 of 10.83 marks or $2.60, a difference of ten cents per $1,000 in favor 
 of the seller. The latter method is close' enough therefore for ordinary 
 transactions. 
 
 A fractional variation of l/'64 of 1% of course, represents 15^ 
 cents per $1,000. 
 
 Rule. — Buy low, sell high. 
 
 STAMPS. INTEREST, ETC. 
 
 45. Stamps, Interest, Etc. — The stamp duty on cheques in Germany 
 is 10 pfennige each and on bills of exchange 50 pfennige for each 
 1,000 or fraction thereof. 
 
 For quotation purposes the stamp duty is reckoned as 1/20 of 
 1% or .05 cents per marks 400. 
 
 To avoid the stamp tax cheques on Germany should bear the 
 following words written after the name of the drawee bank: "Pay 
 against this cheque from our credit balance." 
 
 Drafts drawn in dollars are stamped on a basis of marks 4.25 per 
 dollar. 
 
 If bills are in sets, only the copy actually in circulation is subject to the stamp. 
 Bills may be accepted previous to having been stamped, but in that case they must 
 bear the indication "Only for Acceptance" (Nur zum Accept bestimmt) and their 
 back must be crossed. This is done to prevent endorsements on the bill. Bills 
 on Germany but payable out of Germany must be stamped on acceptance. 
 
 The interest is calculated on a basis of marks 4. to 95 cents, and 
 360 days to a year, and 30 to the month. 
 
 There are no days of grace. 
 Bills due on a Sunday or a holiday arc payable the following day. 
 
 Protest for non-payment of a bill of exchange must be made, at the latest, 
 on the second working day after the bill wks due. 
 
The Continental Exchanges 
 
 59 
 
 Notice of non-payment must be sent to the last endorser not later than two 
 days after protest is levied. 
 
 Bills must be accepted without delay whenever presented. 
 
 Documentary acceptance bills are generally discounted at the open market 
 (private discount) rate and documentary paymetit bills at the Reichsbank discount 
 rate. 
 
 Contrary to the practice of English Banks, German Banks will discount 
 documentary payment bills and place the proceeds to the credit of the American 
 Bank's account. 
 
 German Exchange Intere^ Table for Use in Purchasing 
 
 Bills of Exchange 
 
 Rate 
 
 3 days' 
 
 10 days' 
 
 30 days' 
 
 60 days' 
 
 90 days' 
 
 per cent. 
 
 sight 
 
 sight 
 
 sight 
 
 sight 
 
 sight 
 
 Basis 
 
 $95. 
 
 $95. 
 
 $95. 
 
 $95. 
 
 $95. 
 
 1/16 
 
 .001 
 
 .002 
 
 .005 
 
 .010 
 
 .015 
 
 1/8 
 
 .001 
 
 .003 
 
 .010 
 
 .020 
 
 .030 
 
 1/4 
 
 .002 
 
 :007 
 
 .020 
 
 .040 
 
 .059 
 
 1/2 
 
 .004 
 
 .013 
 
 .040 
 
 .079 
 
 .119 
 
 3/4 
 
 . 006 
 
 .020 
 
 . 059 
 
 .119 
 
 .179 
 
 1% 
 
 .008 
 
 .026 
 
 .079 
 
 .158 
 
 .237 
 
 2% 
 
 .016 
 
 .053 
 
 .158 
 
 .317 
 
 .475 
 
 3% 
 
 .024 
 
 .079 
 
 .238 
 
 .475 
 
 .712 
 
 4% 
 
 .032 
 
 .106 
 
 .317 
 
 .633 
 
 .950 
 
 5% 
 
 .040 
 
 .132 
 
 .396 
 
 .792 
 
 1.187 
 
 6% 
 
 .047 
 
 .158 
 
 .475 
 
 .950 
 
 1.425 
 
 Stamps 
 
 .05 
 
 .05 
 
 .05 
 
 .05 
 
 .05 
 
 The above figures are calculated on the basis of marks 400 being 
 equal to $95 and 360 days to the year. 
 
 In order to avoid German stamp duty American exporters instead of drawing 
 sight drafts on their German customers, instruct the latter by formal letter to pay 
 the amount of the purchases to the American Bank's German correspondent. 
 
 These are called Letters of Delegation and are sold quite extensively. 
 They are usually accompanied by bills of lading only, to be delivered-©n payment 
 of the amount involved. Sometimes, however, the other shipping documents 
 are attached as in the case of documentary drafts. 
 
 The Imperial Reichsbank of Germany transfers money from one branch to 
 another free of charge for clients who carry satisfactory balances. These are 
 known as Giro conto transfers. Outside of convenience to the customers the 
 practice evades the stamp duty on cheques. 
 
 As money can be transferred by the Giro conto system to any city in Ger- 
 many where a branch of the Reichsbank is located, premium or discount on 
 exchange between different German cities (as in the case between New York 
 and Chicago or between Canada and the United States) is unknown. 
 
 Cash items and remittances are credited to the account "value," (by value 
 is meant the date from which interest is credited or debited) the day following 
 the date of actual payment, instead of "value" the date of payment as in London. 
 
 PURCHASE OF BILLS OF EXCHANGE 
 
 46. Purchase of Bills of Exchanoe. — The Canadian demand rate is 
 obtained by adding the premium (or deducting the discount) on New 
 York exchange to the demand rate for marks quoted in New York. 
 
60 Notes on Foreign Exchange. 
 
 This demand rate is ihe basis from whicli the rates for bills arc cal- 
 culated. 
 
 The following statement shows the deductions which should be 
 made from the demand rate for the \arious classes of bills: — - 
 
 3 days' sight: 1/20% stamp dutv, plus 3 days' interest 
 15 " " " '" 15 " 
 
 30 " " " " 30 " 
 
 60 " " " " 60 " 
 
 90 " " " " 90 " 
 
 The German official bank rate and the private discount rate govern 
 the interest on the different classes of bills. 
 
 Quotations for time bills drawn on Germany are arrived at by 
 deducting the interest, stamps, etc. from the demand rate. 
 What price can be paid for: — ■ 
 
 60 days' sight draft on Hamburg, Reichsbank rate 3%, Canadian 
 premium on New York funds 1, 32 of 1%. 
 
 New York cheque rate on Berlin 953^ = 95.50 
 Add New York funds at 1/32 = .03 
 
 95.53 
 Less stamp dutv 1^20 of 1%.. .05 
 60 days at 3%.'. . 48 .53 
 
 95. or 95c per 4 marks 
 
 If the New York rate is supplemented by a fractional quotation, 
 the following decimals should be added or deducted, as the case may 
 be, to the rate in calculating the value of the bills: — ■ 
 
 1/64 .00015 1/32 .00030 3 04 .00045 
 
 Thirty davs' sight draft, interest 3%, Canadian Cheque rate 953^^ 
 plus 3/64. 
 
 Canadian cheque rate 95.50 
 
 plus 3/64 of 1% 045 
 
 95 545 
 less Stamps 1/20 of 1%. .05 
 
 30 days at 3% 24 .29 
 
 95.255 or 95 3.^ 
 
 In the case of sight bills drawn with documents' against acceptance, the 
 first of exchange is generally forwarded direct to the point on which it is drawn 
 for the purpose of fixing the date of maturity of the bill at the earliest possible 
 moment. The second of exchange is forwarded direct to Berlin or other central 
 town in which the Canadian bank keeps its account, for discount and credit. 
 
 It is not customary to endorse the first of exchange, but endorsements by the 
 bank may be made to the order of its correspondent in Berlin, to whom the duly 
 endorsed seconds of exchange are remitted in due course. 
 
 Importers in Germany as a rule will not accept drafts against importations 
 until the duplicate documents (duplicate draft, bill of lading, etc.) are presented, 
 
The C()Xti>'extal Exchanges 01 
 
 and in order to have the original draft accepted immediately upon its arrival, 
 banks in this country when forwarding such bills for acceptance and collection, 
 should attach to the original draft a memorandum agreement to the effect that the 
 duplicate of bill of lading is in their possession and that the duplicate documents 
 will be deli\cred in due course. 
 
 In the case of bills which are not payable in Hamburg or Berlin, a commission 
 charge varying from 1/10 to 1/20 of 1% is made for collection. This charge 
 should of course, be taken into consideration in calculating the value of a bill. 
 
CHAPTER VII. 
 
 - THE CONTINENTAL EXCHANGES (Continued) 
 
 THE LATIN UNION 
 
 47. TJie Latin Union. — The Latin Union was formed in 1865 by 
 France, Belgium, Italy and Switzerland, (while Greece joined in 1867), 
 and was designed for the purpose of providing a uniform monetary 
 system for Southern Europe. A bi-metallic or double standard was 
 adopted, both gold and silver coins being made legal tender at a ratio of 
 1 to 153^. This was the French system, and already partly prevailed 
 in the four other countries. 
 
 Alt the coins used in these countries were made exactly the same 
 weight, and fineness though known under different names. The 
 silver five franc piece (or its equivalent) was the principal coin and 
 could be coined in unlimited quantities. The coinage of subsidiary 
 silver was regulated, and every country was bound to redeem in gold, 
 at stated intervals, its own silver coins which were found with the 
 other members of the Union. 
 
 Both gold and silver (five franc pieces only) were legal tender 
 and could be coined in unlimited amounts. The Italian silver coins 
 of less than five lire, however, were excluded from this arrangement, 
 as were also copper coins and paper money. 
 
 The adoption by Germany in 1871 of the gold standard caused 
 such a depression in silver that the ratio of 1 to 153^ was found ab- 
 surdly high, and to prevent the export of gold, France and the other 
 members of the Latin Union finally suspended the coinage of the five 
 franc silver piece. At present, therefore, the members of the Latin 
 Union are practically on a gold standard basis, though the existing 
 five franc silver pieces continue to be full legal tender. 
 
 This compromise between a single and a double standard is 
 called "etalon boiteux" or "limping standard," because the silver 
 franc pieces has in all markets a value considerably higher than the 
 silver it contains. 
 
 The franc of one hundred centimes is the unit for France, Bel- 
 gium and Switzerland. The gold franc weighs .32258 grammes 
 9/lOth fine or .290322 grammes of pure gold. A five franc silver 
 piece weighs 25 grammes, 900 fine, or 22.5 grammes of pure silver. 
 The franc is known as the lira (plural lire) in Italy, and drachma in 
 Greece. The centime is called the centisimo j(plural centisimi) in 
 Italy and the lepton (plural lepta) in Greece. 
 
 Although not members of the Latin Union, the following countries 
 have adopted a similar monetary system and a decimal coinage 
 practically equivalent in \alue: — 
 
 Roumania — the lei equal to 100 bani 
 Bulgaria — the lew equal to 100 stotinki 
 Finland — the mark equal to 100 penni 
 Spain — the peseta equal to 100 centimos 
 Servia — the dinar equal to 100 paras 
 
The Continental Exchanges 63 
 
 Venezuela, Ecuador, Bolivia, Peru, Argentina and other Southern 
 and Central American States have also adopted decimal coinage and 
 other features of this monetary system. 
 
 So far as the countries in Southern Europe are concerned, an 
 explanation of the system in one, answers for all, and France being 
 the most important member of the Union, the French system, as shown 
 in Chapter V. can be taken as an example. 
 
 HOLLAND OR THE NETHERLANDS 
 
 48. Holland or The Netherla?ids. — Holland is generally classed as a 
 double standard country, but, like France, its present standard is a 
 "limping" one, as it has a gold standard conjointly with the circula- 
 tion (as legal tender) of the silver rixdaler, florin and half florin. The 
 balance of indebtedness is usually in favour of Holland, and though 
 Amsterdam is the fourth largest exchange centre in Europe, Holland 
 has had no difficulty in adjusting her international transactions in 
 gold. 
 
 Monetary Unit. — Florin (guilder or gulden) — 100 Dutch cents 
 
 (40.2 cents). 
 
 Paper Money.— Nederlandsche Bank notes: 500, 300, 200, 100, 
 60, 40, 25 Florins. State Bank notes (pavable by Nederlandsche Bank) 
 50, 10 Florins. 
 
 Gold Coins.— 10 Florins, 6.7200 grammes 900 fine or 6.048 gr. 
 fine gold. 
 
 Silver Coins.— Rixdaler (23/^ Fl.) 1, i^, M> 1/10, 1/20 Florins. 
 Silver florin 10 grammes, .945 fine or 9.45 grammes pure silver. 
 
 Minor Coins. — 5 cents (nickel) 2^/^, 1, 3^ cent (bronze) — legal 
 tender to the amount of Fl. 1. The ratio in coinage of gold to silver 
 is 1 to 15.625. 
 
 Legal Tender. — In addition to gold the 23^-2, 1 and }4 silver 
 florins are unlimited legal tender in Holland and her colonies. 
 
 Quotations on Holland are quoted in cents per guilder or florin 
 (the par value being 40.20 cents) advancing by .01 cents as in the other 
 exchanges 40.20, 40.21, 40.22 cents, etc. The rate is also expressed 
 40 ]V,, 40g cents, etc., and for large transactions the rates are sup- 
 plemented by fractions as in German quotations. 
 
 The conversion is simple arithmetic. To convert dollars into 
 florins, divide the dollars by the rate per florin. To convert florins 
 into dollars, multiply the amount in florins by the rate per florin. 
 
 The bill stamp is 1/20 of 1% or two cents per $40. 
 
 Interest on Dutch long bills is based on $40 per 100 guilders or 
 florins.* 
 
 * The interest is easily reckoned on a basis of $40 per 100 florins, or the con- 
 stant ,j Jq^ multiplied by rate and time will give the interest on .$-40. 
 60 days at 4% = g J^^ X60X4 =^\ or 26.1 cents. 
 
64 Notes on Foreign Exchange. 
 
 « 
 
 There are no days of grace and interest is reckoned by taking the 
 exact number of days and the year at 360 days. 
 
 Bills due on Sundays or holidays are paid the day after. 
 
 Where fractional rates are used they should be dealt with in a 
 manner similar to the method used in German calculations, and 
 added to or deducted from the dollar value when con\erting florins 
 into dollars, but where dollars are converted into florins, 'the equiva- 
 lent of the fraction converted into florins must be added if minus, and 
 deducted if plus. 
 
 The difl'erences made by (1) a fractional advance (2) one hun- 
 dredth of a cent advance (3) 1/16 of a cent advance, are illustrated 
 below : — 
 
 Florins Rate Dollars 
 
 2.500390 40—1/64 .3999375 
 
 2.50 40 .40 
 
 2.499609 40+1/64 .4000625 
 
 2.499375 40.01 .4001 
 
 2.490099 40 ,V .400625 
 
 An advance of .01 cent in rate represents a profit of 25 cents per 
 Sl.OOO. 
 
 An advance of 1 16 cent (or .063^ cent) represents a profit of 
 $1.56 on $1,000. 
 
 Where quoted rates are supplemented by fractional quotations 
 it is necessary to take these fractions into consideration in calculating 
 the rates to be paid for bills, as follows: — 
 
 1/64 .0062 I ^ , , , 
 
 1 ^32 01*^5 ^ P percentage. . 
 
 3/64 :0187,Pe^^40 
 
 1 ''16 0250 ' Deduct tor a minus percentage. 
 
 Example. — Find the value of a 60 dav bill on Amsterdam, discount 
 rate 3%, demand rate 40 1/16-1/32 
 
 40 1/16 =40.0625 
 
 less 1/32 of 1% 0125 
 
 40.0500 
 
 Less Interest 00 davs at 3%. . .20 
 
 Stamps 1,20 of 1% 02 .22 
 
 39 . 8300 or'39.83 cents per fl . 
 
 AUSTRIA-HUNGARY 
 
 49. Austria-Hungary . — The monetary system of Austria-Hungary is 
 based on gold (since 1892), and the legal monetary unit is the crown 
 or krone, .338753 grammes .900 fine, worth about 20.26 cents. 
 
 Monetary Unit. — Krone (Crown) — 100 Heller. Plural of Krone 
 is Kronen. Old I'liit — Florin or Guilder — 100 Kreutzers. 
 
Thp: Conti.nextal Exchanges 65 
 
 Paper Money.— 1000, 100, 50, 10, 5 Kronen. The old florin 
 notes are considered valueless. 
 
 Gold Coins. — 20, 10 Krone; 4, 2, 1 ducats. A ducat is worth 
 about $2.2878; one gold ducat contains 53.8728 grains .986y line. 
 The ducats are commercial coins, but are not legal tender. 
 
 Silver Coins. — 5, 1 Krone, 1 Florin, 20, 10 Kreutzers. The 10 
 and 20 Kreutzer pieces are now only accepted at their bullion value. 
 The 5 Krone piece is coined exclusively for the State, it is unlimited 
 legal tender to the State at its nominal value, but in private business 
 transactions to Kr. 250 only. 5 Krone silver piece 370.3765 grains 
 .900 fine. 
 
 Minor Coins. — 20, 10 (pure nickel) Heller, 2, 1 (bronze) Heller. 
 Nickel coins are legal tender to the amount of Kr. 10, bronze coins to 
 Kr. 10 for public dues and Kr. 1 for private dues. 
 
 The Maria Theresa dollar was created in 1780 by Maria Theresa, 
 and it is still coined by the Vienna Mint, although it is never seen in 
 Austria. It is minted for the commerce in the East as a "trade 
 coin"; i.e., a coin without the obligation of redemption. It is worth 
 about 85 cents, but fluctuates according to the price of silver. (See 
 page 67). 
 
 Most of the exchange business with Austria is conducted through 
 London and Berlin, but the demand for foreign money orders and 
 mail remittances is considerable.* The quotations are given in cents 
 per crown, advancing bv steps of .01 cents; quotations are sometimes 
 given 20.01, 20.013^, 20'.013/^, 20.01^, 20.02 cents. 
 
 A fluctuation of .01 cents amounts to about 50 cents on $1,000. 
 
 RUSSIA 
 
 50. Russia. — The Russian monetary svstem is based on gold (since 
 1899); the monetary unit is the gold Rouble (100 Kopecks) .86026 
 grammes .900 fine, worth 51.45 cents. 
 
 The silver rouble is .900 fine and weighs 19.9957 grammes. 
 
 Monetary Unit. — Rouble — 100 Kopecks. 
 
 Paper Money. — Bank of Russia 100, 25, 5, 3, 1 Roubles (care 
 should be taken in handling Russian notes as some excellent forgeries 
 are extant). 
 
 Gold Coins. — Imperial (15 Roubles) 10 Roubles, Half Imperial 
 (73^2 Roubles) 5 Roubles, Ducat (3 Roubles). 
 
 Silver Coins. — 1, 3/^, 34 Roubles; 25, 20, 15, 10, 5 Kopecks. The 
 ratio of gold to silver in present coinage is 1 to 23.2438. 
 
 Minor Coins. — 5, 2, 1 Kopeck (copper). 
 
 Gold and silver are usually on a par with paper money. 
 
 Legal Tender. — The Rouble, 50 Kopeck and 25 Kopeck pieces 
 are legal tender among private persons to an amount not exceeding 
 Roubles 25 and the other silver coins to the amount of Roubles 3. 
 The Government accepts these silver coins to any amount in all pay- 
 
 * Section 22. 
 
66 Notes on Foreign Exchange. 
 
 ments, except for customs duties, the amounts accepted for the latter 
 purpose being governed by custom house regulations. Minor coins 
 are legal tender to the amount of Roubles 3. Gold coin of full weight 
 is legal tender for any amount. 
 
 There is very little call in Canada for Russian exchange, except 
 by immigrants in remitting home and for that purpose foreign money 
 orders and mail remittances are used.* 
 
 Quotations are given in cents per rouble, advancing by .01 or .05 
 cents. A fluctuation of .01 in the rate amounts to about 19 cents on 
 S1,000. 
 
 SCANDINAVIAN UNION 
 
 51. Scandinavian Union. — This monetary union was formed by 
 Norway, Sweden and Denmark in 1875. The monetary unit is 
 the gold crown or krone (.44803 grammes .900 fine) worth about 26.8 
 cents. The coinage of gold is free and the gold coins of the three 
 countries have unlimited lawful currency throughout the Union. 
 
 Monetary Unit. — Krone (crown) — 100 Ore. The plural of 
 Krone is Kroner. In Sweden the unit is known as Krona, plural 
 Kronor. 
 
 Paper Money. — Notes are issued in denominations of 1,000, 500, 
 100, 50, 10, 5 Kroner by the Norges Bank, Norway; the Sveriges Bank, 
 Sweden, and the National Bank of Denmark, Denmark. 
 
 Gold Coins. — 20, 10, 5 Kroner, 10 Kr. gold piece 4.4803 grammes 
 .900 fine. 
 
 Silver Coins. — 2, 1 Kroner; 50, 40, 25, 10 Ore, legal tender to 
 Kr. 20. 
 
 Minor Coins. — 5, 2, 1 Ore (bronze) legal tender to the amount of 
 Kr. 1. 
 
 Stamp Duty. — 1/20% Norway and Sweden only. Denmark 
 1/60 to 1 50%, according to amount. 
 
 Quotations are on a basis of cents per crown, adxancing .01 cents 
 and sometimes by .003^ cents. 
 
 A fluctuation of .01 cents in the rate amounts to about 49 cents 
 on $1,000. 
 
 * See Section 22. 
 
CHAPTER VIII. 
 
 SUNDRY EXCHANGES 
 THE GREAT EXCHANGE CENTRES 
 
 52. The Great Exchange Centres. — The five great exchange markets of 
 the world are London, Hamburg, New York, Paris and Amsterdam, 
 and a knowledge of these should prove sufficient for all ordinary 
 exchange transactions. London is the most important centre, and 
 acts as an international clearing house where exchange on every 
 country in the world can be purchased or sold, hence a draft on London 
 is assured of a ready market the world over; the same is true of drafts 
 on the other cities mentioned, though to a much less degree. 
 
 If a Canadian importer, for instance, desires to purchase tea in 
 China, silk in Japan, or wool in Australia, he arranges through his 
 bank, as explained in Section 24, for a commercial letter of credit 
 on London, in fa\'our of the consignor in China, Japan or Australia. 
 If, on the other hand, a Canadian exporter sells goods in other 
 countries, he requests his customers to open a credit for him in 
 London or some other large centre. All large transactions, there- 
 fore, are financed through the principal exchange centres by means 
 of letters or other instruments of credit, and direct exchange between 
 Canada and other foreign countries is more or less of a minor character. 
 
 To give some idea of the enormous volume of the business, the 
 needs of which have called into existence the modern system of foreign 
 exchange, we give below the exports and imports of the principal 
 countries of the world for the year ending December 1913: — ■ 
 
 Imports Exports 
 (omitting 000,000) (omitting 000,000) 
 
 Great Britain.. . . $.3,080 $2,371 
 
 Germany 2,-54.5 2,132 
 
 United States 1,717 2,311 
 
 France 1,589 1,296 
 
 Austria 726 591 
 
 Canada 670 356 
 
 Russia 603 782 
 
 Denmark 215 156 
 
 Sweden 185 177 
 
 Netherlands 144 188 
 
 Norway 141 87 
 
 As all these exports and imports must be paid for either by ship- 
 ping gold or by "exchange," the importance of the system becomes 
 apparent. 
 
 It will be noted that the imports of the above countries, except 
 those of the United States, Russia and the Netherlands, exceed the 
 exports. Such excess does not necessarily place a country at a dis- 
 advantage as in the case of old countries the difference is probably 
 
68 Notes ox Foreign Exchange. 
 
 made up by what are called "invisible" exports, that is of money in- 
 vested abroad, and goods are imported to pay the interest on these 
 investments and sometimes to repay the principal. In the case of a 
 young country like Canada, however, the excess of imports probably 
 consists of goods purchased by money borrowed abroad for capital 
 expenditure, and the bulk of them will be found to be material for 
 railways, factory plants, public works, etc. 
 
 MONEYS USED IN THE DIFFERENT COUNTRIES OF THE 
 
 WORLD 
 
 53. Moneys used in the different countries of the world. — The par- 
 ticulars of coins given in Table V. have been compiled from various 
 publications, and while they are sufficiently accurate for general 
 information, they are not intended for use in commercial transactions. 
 
 Nearly all coins contain alloy (inferior metal) to increase their 
 durability, and while their purchasing power in the home country is 
 the same for both large and small sums, in other countries and in ex- 
 change transactions their bullion value only is considered. The weight 
 and fineness of coins of the same denominations vary in different 
 countries, and the coins are of different exchange values. 
 
 In estimating the value of gold or silver coins, therefore, the basis 
 must be the weight of pure metal in the coins taken at the current 
 price of gold or silver. The average price of bar gold per ounce .900 
 fine, is $18,605, while the price of an ounce of silver varies from 50 
 to 60 cents. An ounce contains 480 grains of pure silver, and an 
 ounce standard contains 444 grains of pure silver. 
 
 Token money is that part of the money of a country which 
 circulates not by reason of the intrinsic value of the metal it con- 
 tains, but by reason of the legalized relation which it bears to the 
 standard monetary unit of the country. It is also called subsidiary 
 money. All standard gold coins are intrinsically worth the amounts 
 named upon them, but the silver and copper coins are not, the bullion 
 value of a silver coin being about half of its face value. The difference 
 is called seigniorage and accrues to the government as a profit. 
 
 Sterling, etc. — Although sterling is the current money in South 
 Africa, Australia, British West Indies and other colonies and posses- 
 sions of Great Britain, that fact does not give the holder of a sterling 
 draft on London the right to ask for the full amount specified thereon. 
 That amount will be paid at the current rate of exchange for sterling 
 drafts on London. 
 
 A similar remark may also be made regarding the colonies and 
 dependencies of other countries which use the same currency (francs, 
 etc.) as the respccti\e mother country. In such places drafts are paid 
 at the current rate for purchasing exchange on the capital of the 
 respectixe mother country. 
 
 Sterling and Dollars in West Indies. — Although both sterling 
 and United States dollars are accepted and used in the British West 
 
Sundry Exchanges 69 
 
 Indies, sterling is the legal currency, and the proclaimed rate of 
 exchange $4.80 to £1 (that is 2 cents = l penny). 
 
 Monetary Units in Europe. — The dinar, drachma, lei, leva, 
 lira, markka and peseta are coined after the model of the French 1 
 franc piece (see Latin Union) and are of the same weight, fineness and 
 value. 
 
 Monetary Units in South America, etc. — The boliviano, 
 gourde, peso, piastre, sol, sucre and venezolana in use in Central 
 and South America are coined on the model of the French 5 franc 
 silver piece. 
 
 In the case of countries in Asia or South America where a silver 
 unit exists, the exchange value of coins is subject to wide fluctuations. 
 In several of these countries the monetary system is in a state of 
 transition from a silver to a gold standard. In South American 
 countries large quantities of paper money (usually worth much less 
 than the face value) are in circulation. 
 
 AUSTRALASIA 
 
 54. Australasia. — Australasia uses the same monetary system and 
 coins as Great Britain, but the latter are of a different design. Bank 
 notes are issued by the Commonwealth Bank of Australia. 
 
 As the imports into Australia from Great Britain are greater than 
 the exports, and payments made in London relieve the Australian 
 banks from the expense of transferring gold to Great Britain, Austra- 
 lian banks are willing to accept less than the face value of a draft 
 drawn on an Australian bank if cover is sent to their London office 
 at the time the draft is issued by the Canadian bank. Thus a draft 
 for £100 issued on Melbourne can be covered by remitting (say) 
 £99. L5s. Od. to the London office of the Australian bank at the time 
 the draft is issued. Conversely in the case of a draft for £100 drawn 
 by an Australian bank on a Canadian bank, the Canadian bank 
 would draw on the Australian bank's London office for £100 plus 
 commission. 
 
 Cable transfers are treated in a similar manner to drafts. 
 
 The Australian and New Zealand banks have an agreement 
 amongst themselves as to the commission rates to be charged on the 
 various classes of business. The rates quoted by any one bank are 
 therefore applicable to all the other banks. 
 
 There is no direct rate of exchange between Australia and Canada 
 since the settlement is usually made in London, and the premium in 
 Australia on London exchange is very steady. As a matter of interest 
 the following were the rates quoted in the "Economist" on 14th 
 July, 1914:— 
 
 • London on Australia: — ■ 
 
 Buyers Sellers 
 
 Demand £98^ par 
 
 Cable £1001^ 
 
 30 days £98M 
 
rO Notes on Foreign Exchange. 
 
 Australia on London: 
 
 
 
 Cable 
 Demand 
 30 days 
 
 £99'i^' 
 £98M 
 
 £1003^ 
 £100 
 
 £99^^ 
 
 INDIA 
 
 55. India. — • 
 
 Monetary Unit. — Rupee (180 grains silver .925 fine) = 16 annas 
 = 64 pice = 192 pies. 
 
 Paper Money. — Government notes in denominations of 5 rupees 
 and upwards. 
 
 Gold Coins. — Rupees 30 (Double Mohur), rupees 15 (Mohur), 
 rupees 10. 
 
 5. Gold is not used extensively, although large sums are hoarded. 
 1 lac = 100,000 rupees. 
 1 crore=100 lacs = 10,000,000 rupees. 
 
 The Mohur is no longer coined and is rarely seen in India. 
 
 Silver Coins. — 1, 3^, 3^, Y^ rupee, 2 annas. 
 
 Minor Coins. — 1/16 rupee (nickel). Double Pice (3^ anna), 
 Pice (3<4 anna), 3'2 Pice (3^ anna). Pie (1/12 anna) copper or bronze. 
 
 Legal Tender. — The rupee and divisional silver pieces are un- 
 limited legal tender. The sovereign is legal tender for Rupees 15. 
 
 The Indian States of Dewas, Nepal, Paduikota, Punjab and Sindh 
 have a coinage of their own, but Indian coins circulate freely. 
 
 The silver system was superseded in 1899 by the gold standard 
 system wdth an arbitrary rating of the rupee at 16 pence (32.44 cents) 
 which is maintained b}^ means of a gold redemption fund called the 
 "Indian Gold Standard Reserve" accumulated in London for that 
 purpose. 
 
 The exchange value of the rupee depends on the result of the 
 harvest. In good years exchange rises above the fixed price of 16 
 pence per rupee; in bad years the Government maintains the rate 
 of 16 pence per rupee by selling sterling drafts or telegraphic transfers 
 on London against a fund in London called the "gold standard 
 reserve" accumulated mainly for the purpose of maintaining the 
 value of the rupee whenever the exchange turns against India. 
 
 SILVER STANDARD 
 
 56. Silver Standard. — The silver standard exists in countries where 
 it is enacted by law that silver shall be the measure of value. China 
 and its dependencies and some countries in South America are* the 
 exponents of this standard. The domestic trade of these countries 
 is regulated by the bullion price of silver, but all outside transactions 
 are based on gold, and in the end the value of silver is thus regulated 
 by these international transactions. The number of silver using 
 
Sundry Exchanges 
 
 71 
 
 countries is rapidly decreasing. With the exception of Japan and 
 India, practically all Eastern nations use silver either in the form of 
 coins or bars and the rates of exchange rise and fall with the price of 
 silver. Owing to the violent variations in these rates, business is a 
 highly specialized one and quotations and drawing facilities on the 
 Orient are usually provided Canadian banks by one of the Anglo- 
 Asiatic banks. 
 
 The following are the principal coins referred to in Table V. as 
 being used in these countries: — 
 
 grammes grammes 
 
 Name fineness gross fine 
 
 British Dollar 900 26.9569 24.2612 
 
 Mexican Dollar 902 . 7 27.073 24.4388 
 
 Maria Theresa 8333^ 28.0668 23.3889 
 
 Straits Settlements Dollar... 900 20.2177 18.1958 
 
 Indo China Dollar 900 27.000 24.300 
 
 China Dollar or Yuan 900 26.8567 24.171 
 
 India Rupee 916^ 11.664 10.692 
 
 Marie Theresa Dollar. — This is a trade coin (one without the 
 obligation of redemption) minted at Vienna but not used in Austria. 
 It is current with full legal tender value in Abyssinia, Arabia, East 
 Coast of Africa, Eritrea, Oman, Persian Gulf countries, Tripoli, and 
 countries of the Eastern Mediterranean and Asia Minor. 
 
 Mexican Peso. — This coin, also called "Mexican Dollar," is full 
 legal tender in Hong Kong and China; it is preferred by the Chinese to 
 the coins minted by themselves. 
 
 British Dollar. — This coin was created in 1894 in response to 
 the great demand for currency in the far East. ■ It is legal tender in 
 Hong Kong and Labuan. 
 
 Indo-China Piastre. — This coin was introduced by the French 
 Government to help commerce in her Asiatic colonies. It is modelled 
 after the Mexican dollar, and is accepted as equivalent to the latter 
 coin. 
 
 Straits Settlement Dollar is only coined for circulation in the 
 Straits Settlements, it has a fixed value of 2s. 4d. 
 
 Trade Dollar. — A dollar coined by the United States to compete 
 with the Mexican dollar in trade with China and the Far East. It 
 had no statute within the United States, and has been withdrawn from 
 circulation; any still outstanding have only a bullion value of about 
 50 cents. 
 
 China. — The tael, mace and candareen are simply denominations 
 representing certain fixed weights of silver. The weights and value 
 vary according to the location of issue. Actually there are no silver 
 ingots of one tael; the ingots usually weight from 7 to 10 taels. 
 
 The Hai Kwan (or customs) tael is the most important. It is 
 rated at 72 per 100 Mexican pesos. 
 
 The Shanghai tael weighs about IjV oz. of standard silver and is 
 worth about 65 to 70 cents. 
 
72 Notes ox Foreign Exchange. 
 
 As a matter of comparison, the following table shows the weights 
 
 etc., of the principal token or subsidiary sihcr coins of the gold stand- 
 ard countries, with their fixed \alues: — 
 
 grammes grammes 
 
 fineness gross fine value 
 
 1 Brazil 2,000 reis 900 20. 18. 61.0926 
 
 2 Austria 5 crowns 800 24. 21.600 1.013 
 
 3 Holland 2^7 florins. . . 945 25 23.625 1.0048 
 
 4 Canada 1 dollar 925 23.3281 21.5784 1. 
 
 5 United States 1 dollar. 900 26.7301 24.057 1. 
 
 6 Latin Union 5 francs.. 900 25 22.500 .9647 
 
 7 Scandinavia 1 crown. . 800 15. 12. .5359 
 
 8 Russia rouble 900 19.9957 17.9961 .5145 
 
 9 India rupee 916% 11.664 10.692 .3244 
 
 10 Japan 50 sen 800 10.125 8.100 .2492 
 
 11 Great Britain shilling. 925 56.553 5.2311 .2433 
 
 12 Germany 1 mark 900 5.555 5. .2381 
 
 The above figures are taken from "The Monetary Systems of the Principal 
 Countries of the World" compiled by the Director of the United States Mint, 
 1913, the calculations being based on a gramme containing 15,432 grains. 
 
 THE PAPER CURRENCIES 
 
 57. The Paper Currencies. — Paper money issued by a Government, 
 when adequately supported by gold reser\'es, is a most useful factor 
 in the finances of a country, when not so supported it is likely to prove 
 a curse in the long run, as all the countries that have tried it have 
 found. Paper money which cannot be converted into cash at its 
 face value, but which nevertheless must be accepted as representing 
 the value printed upon it, is called inconvertible paper money. 
 Paper currency of this kind is practically a non-interest earning loan 
 forced upon the public, with the natural consequence that the more 
 of it that is issued, the less probability there is of its ultimate re- 
 demption, and the more it depreciates in value. Depreciation means 
 that its purchasing power as compared wath that of gold has fallen, 
 or differently expressed, that prices as expressed in paj)er money have 
 risen. If it requires, for instance, 225 paper dollars to purchase 100 gold 
 dollars, gold is at a premium of 125 per cent, and paper money is at 
 a discount of 44.4/9%, or again, three hundred per cent, premium, 
 means that for 100 gold dollars you would have to give 400 (300 
 plus 100) paper dollars.* 
 
 * In this connection the following problems will be found interesting: — 
 (1) The premium on gold is 300St ; at what % discount is paper money.-" 
 
 75% discount. 
 
 Answer:— 300X100 30,000 ^^^ 
 
 300 plus 100 400 
 
 (2) Paper currency is at a discount of 75% as compared with gold; what is 
 the premium on gold? 
 
 Answer:— 75X100 7,500 ..^^ 
 
 100=75 = ~2F^=^°°^'' premium 
 
Sundry Exchanges 73 
 
 When the paper currency of a country depreciates, the exchanges 
 fall in sympathy, for as foreign exchanges are on a gold basis, the 
 premium on gold naturally extends to them. Depreciation, therefore, 
 stimulates exports, and benefits those who have to receive money from 
 foreign countries, but checks imports and adversely affects those 
 who have to pay money to foreign countries. For instance, take the 
 case of Brazil, when exchange is at 15 pence per milreis, an exporter 
 would receive 16,000 milreis for a £1,000 draft on London, but with 
 exchange fallen to 12 pence he would receive 20,000 milreis for the 
 £1,000, a profit of 4,000 milreis, probably clear, as it is unlikely that 
 his rent and other expenses in Brazil have increased. He has made a 
 large profit out of the turn of exchange. On the other hand, an 
 importer buys £1,000 worth of goods in England; he will have to 
 pay, when exchange is at 15 pence, 16,000 milreis; but when exchange 
 drops to 12 pence per milreis, he will have to pay 4,000 milreis more for 
 his £1,000. Consequently the importer has to be constantly raising 
 his prices to meet the fall in exchange, and the public in turn have to 
 meet these increases and pay greatly enhanced prices for the neces- 
 saries of life, although their wages, salaries, etc., remain exactly the 
 same. 
 
 The great modern experimenters of paper money currency have 
 been the South and Central American republics, the majority of 
 whom, though they are theoretically on a gold basis, are in reality 
 sunk in the slough of inconvertible paper money, though there has 
 been a tendency of late years on the part of the better governed re- 
 publics, to put their currency and finances on a sounder basis. Among 
 these may be mentioned Venezula, Uruguay, Peru, Ecuador, Costa 
 Rica and Bolivia. The following countries are still on an incon- 
 vertible paper basis with a more or less fixed premium on gold: — 
 
 Premium on gold Value $100 gold 
 
 'Guatemala 127.27% $ 227.27 paper 
 
 Chili 84.6 % 184.60 
 
 Columbia 9,900. % 10,000. 
 
 /Honduras 140. % 240. 
 
 Paraguay 1,400. % 1,500. 
 
 Salvador 177.15% 277.15 
 
 ' Canada at present has very little business with these republics, 
 and the few transactions it has are conducted through London or 
 New York. 
 
CHAPTER IX 
 
 FOREIGN EXCHANGE 
 
 Foreign exchange may be defined as a system by which one country 
 .adjusts its financial transactions with another country by means of 
 bills of exchange and other credit instruments. Exchange operations, 
 therefore, are based on the inter-cancellations of indebtedness; that 
 is, the discharging of obligations without the transfer of actual money, 
 namely, gold or its equivalent. By means of this process each country 
 endeavours to pay for what it buys with what it sells and gold need 
 not be shipped except in the case of a country which buys more than 
 it sells. 
 
 The mutual indebtedness of two countries arises from a combina- 
 tion of the following: 
 
 Exports of merchandise 
 
 Foreign investments 
 
 Payments of interest and dividends to foreign shareholders. 
 
 Charges for transportation, insurance and commission paid to 
 foreign corporations 
 
 Tourists' expenditures, etc. 
 
 Sometimes the balance that remains to be paid is in favour of one 
 country and sometimes of the other. The exchange rates rise and fall 
 accordingly within certain well-defined limits, namely, double the cost 
 of shipping gold between the two countries. For instance, under nor- 
 mal conditions the cost of shipping a sovereign to *New York from 
 *London is about two cents, and the mint par** of the pound sterling 
 is $4.86656 ($4.86%), therefore when a lower price than 4.84^^ is 
 offered for a bill of exchange, it is cheaper to import gold from England, 
 and when a higher rate than 4.883^ is asked for a bill of exchange it 
 is cheaper to send gold to England. 
 
 The export of gold from New York to London implies: 
 
 1. That New York owes London (exchange is favourable to 
 London and unfavourable to New York). 
 
 2. That bills of exchange on London have been eagerly 
 sought for in New York in order to liquidate this indebtedness. 
 
 *New York and London are used here to illustrate exchange conditions, but 
 the remarks are equally applicable in a similar sense to other exchange centres, 
 such as Paris, Berlin, Amsterdam, etc. 
 
 **Thc mint par between any two countries using gold for their standard 
 coinage is found by comparing the standard coins of each, basing the calcula- 
 tions on the weight of the fine gold in each coin. A sovereign contains 113.0016 
 grains of fine gold, and the dollar 23.22 grains of fine gold. Therefore 113.0016 
 
 23.22 " 
 
 $4.86650 is the value of the pound sterling, while 23.22 ^ ^ .r,. 
 
 jj3-Q0jg = £20o484 or 4s. 1.- 
 
 316d is the par value of a dollar. 
 
Foreign Exchange 75 
 
 3. That the premium demanded by sellers in the form of a 
 higher exchange rate exceeds two cents per pound and therefore 
 it has become cheaper to buy gold in New York and export it to 
 London. 
 
 Conversely the import of gold to New York from London implies: 
 
 1. That London owes New York (exchange is favourable to 
 New York and unfavourable to London). 
 
 2. That bills of exchange on London have been offered freely 
 in New York to absorb this balance. 
 
 3. That the discount demanded by buyers in the form of a 
 lower exchange rate exceeds two cents per pound and therefore it 
 has become cheaper to buy gold in London and import it to New 
 York. 
 
 Fluctuations in foreign exchange are of great interest and import- 
 ance to the business men buying or selling goods abroad. High 
 exchange rates favour the exporter while low rates favour the importer. 
 With sterling exchange at 4883^^ for each pound nominally worth 
 $4.86656 in goods, the exporter will receive $4,883^ in gold in New York, 
 while with exchange low the importer will only have to pay 4.843^2 
 in New York for goods worth $4.86656. 
 
 From thi^ it will be seen that when the supply of foreign bills is 
 less than the demand, or fails altogether, it becomes advisable to export 
 gold to pay the indebtedness. If, on the other hand, the supply of 
 bills exceeds the demand, the credits abroad are collected by import- 
 ing; the gold. Banks and brokers in exchange in New York and 
 1 '. ndon encourage the public to utilize their services for paying debts 
 a ^>oad, and in order that they may be able to do this also encourage 
 pe.^jle who have claims against others abroad to sell these claims to 
 them so that the banks can thus set off sales against purchases. In 
 other words, banks in this manner are both buyers and sellers of 
 exchange. Should the New York banks, for instance, be called upon 
 to sell more exchange on London than they are able to buy, they 
 must provide funds to meet their withdrawals by exporting gold or by 
 other means. As a rule gold shipments are avoided as much as possible 
 and the required balance in London is often created by: 
 
 1. Buying exchange on other centres and sending to London 
 for credit. 
 
 2. The shipment of securities to London to be sold or bor- 
 rowed against. 
 
 *3. The use of finance bills. 
 
 These are the principal methods resorted to in an endeavour to 
 avoid purchasing exchange at an unfavourable rate, and if, in spite 
 of this the rate still remains unfavourable, the gold is then shipped. 
 
 It will thus be seen that foreign exchange operates as a clearing 
 house between nations, and just as the banks in a town offset their 
 
 *See Chapter XVI. 
 
76 Notes on Foreign Exchange. 
 
 debits and credits against each other and settle the final difference 
 in gold, so nations offset their debits and credits against each other 
 as far as they will go, and in the final analysis settle the difference 
 in gold. In making the settlement between banks a central meeting 
 place or clearing house as it is called, is found necessary, so similiarly 
 in making the settlements between nations London has become the 
 international clearing house. 
 
 It must not be overlooked, however, in studying international 
 exchange that there are no definite settlement days adjusting all 
 transactions to date, because the adjustment of international balances 
 is a continuous process and, under normal conditions, hardly noticeable 
 to the keenest observer, except at certain seasons of the year or as a 
 corrective to some large and unexpected transaction. 
 
CHAPTER X 
 
 RATES OF EXCHANGE 
 
 A bill of exchange is a commodity just like wheat and cotton 
 and like them subject to the law of supply and demand and its price 
 rises and falls accordingly. The rate of exchange must not be con- 
 fused with the ratio at which one country will exchange money for the 
 standard coin of another country. The latter implies the actual 
 handling of cash, either in coin or bank bills, so many dollars or dollar 
 bills for a sovereign and so many shillings for a dollar. If a man wants 
 to change 100 sovereigns and has the British gold in Toronto or New 
 York, the transaction would be based on this ratio, but if his sovereigns 
 are in London, he would realize on them by selling to a bank or broker 
 the "right" or cheque to draw these 100 sovereigns in London. If 
 there is an active demand for sterling exchange, he would probably 
 get a good price for his cheque on London; if, on the other hand, there 
 was no demand for sterling and the supply of cheques was plentiful he 
 would get a low price. 
 
 As already pointed out, the ratio between the gold coins of two 
 countries does not vary because it is arrived at by comparing the 
 amount of fine gold in the respective coins. The ratio of the dollar to 
 the sovereign, for instance, is as 1 :4. 86656. Theoretically a single 
 sovereign in New York is worth $4.86656, but practically this ratio 
 holds good only for large amounts. If a customer asked a New York 
 bank to change a sovereign, he would probably receive only $4.84 or 
 $4.85 for it, the difference being retained by the bank as payment for 
 its services and to cover the interest on the amount until it had col- 
 lected sufficient sovereigns, say 1,000, to warrant the trouble of taking 
 them to the United States *Mint, where they would be exchanged for 
 $4,866.56. 
 
 It will be seen from this that the gold sovereign never depreciates 
 in value. It is always worth par in New York and the gold eagle is 
 always worth par in London. Now suppose the customer in New 
 York, instead of wanting to change sovereigns wants to sell his own 
 cheque on a London bank, say, for £1,000. How much will he get 
 for it? If he were in London he could get £1,000 in gold, but being 
 in New York and wanting the money to use there he sells his "right" to 
 obtain £1,000 in gold in London, as represented by his cheque, and 
 the price he obtains for his £1,000 cheque depends on the demand 
 for sterling exchange. If New York wants money to use in London, 
 it will be willing to give par or better for the right to obtain £1,000 
 there; if, however, New York already has more money in London 
 than it requires for use at the moment it will give less than par. 
 
 *The United States Mint will always pay for English sovereigns at the rate 
 of $18,949,182 per ounce. 1,000 sovereigns weigh 123,247.47 grains (480 grains to 
 the ounce TroyJ. Working this out, we get S4,866.56 as the value of 1,000 sover- 
 eigns. As a matter of fact the Uuited States Mint would pay the bank 90% 
 of this amount ($4,380) on delivery and the balance ten days later, less a small 
 charge of four cents per $100 to cover melting expenses, thus the actual proceeds 
 would be $4,864.61. 
 
78 Notes on Foreign Exchange. 
 
 Similarly the British Mint will take gold eagles at £3:16:53^ per 
 ounce, paying for them a fortnight after delivery without any charge. 
 The Bank of England will pay for them on delivery but makes a small 
 charge of about l^^d per ounce to cover the interest for 14 days at 4%. 
 
 The rate of exchange between two or more places either corre- 
 sponds or tends to correspond. Thus, if New York funds are at 1/8 
 of 1% discount in Canada, Canadian funds will be at 1/8 of 1% prem- 
 ium in New York. The machinery which effects this result is simple. 
 For instance, suppose exchanges between New York and Montreal 
 are at par in both cities and that a large supply of bills on New York 
 is suddenly placed on the Montreal market, forcing the exchange there 
 down to 1/16 discount, a Montreal banker, finding over the wire that 
 he can still buy Canadian funds at par in New York, instructs his 
 New York correspondent to purchase and remit a draft on Montreal 
 for §160,000, and he himself immediately purchases a draft on New 
 York for a similar sum, which, however, costs him only S159,900. 
 Both drafts reach their destination the next morning and practically 
 pay for each other, the result of the transaction being that the Montreal 
 banker has netted $100 profit. 
 
 Similarly, when sterling exchange is at a discount in New York, 
 say at 4.85, New York funds in London will be at a premium, in 
 other words you could purchase in New York the right to obtain a 
 sovereign in London for $4.85, whereas for a sovereign in London you 
 would only be able to obtain the right to $4.85 in New York, a dollar 
 costing 49.50d. instead of 49.316d. the par value. 
 
 Let us suppose that the rate in New York, in response to a demand 
 for sterling suddenly goes to par, and a New York banker, hearing 
 from his London correspondent that New York funds are still at 4.85, 
 cables him to sell $100,000 at that rate and as a result of this trans- 
 action the New York banker receives a credit in London of £20,618.55. 
 At the same time he sells his own draft at par against this amount in 
 London, in actual practice he would sell, say, a draft of £20,000, but 
 for the sake of showing his profit let us presume that he sold a draft 
 for £20,618.55. F'or this he receives $100,343.64 with which he pays 
 the draft of $100,000 drawn on him in London, and thus makes a 
 profit of $343.64 less cable charges and a small commission to the 
 London banker. 
 
 The above examples illustrate how the exchanges automatically 
 regulate themselves between two or more places, as it is ob\ious that 
 untler the infiucnce of several such transactions marginal differences 
 would rapidly disappear. The variations in the rates of exchange 
 for the two cases cited is, of course, large for the purpose of illustration. 
 In practice a very slight difference in the rates will encourage adjusting 
 transactions of the kind which are commonl}- known as arbitrage 
 transactions. 
 
CHAPTER XI 
 
 RATES OF INTEREST 
 
 Reference has already been made to the fact that bills of exchange 
 are a commodity and can be bought and sold like wheat, and like wheat 
 are subject to the laws of supply and demand. If there is a strong 
 demand for wheat and a small supply, prices rise accordingly, while on 
 the other hand, if the supply is large and the demand poor, prices fall. 
 This is also true with regard to bills of exchange, but in this case there 
 is an additional factor to be taken into account and that is the rate 
 of interest. It has already been shown that the difference between the 
 prices or rates of exchange for long and short bills is the interest for 
 the additional term or currency of the former. This would not 
 materially affect the situation if the rates of interest were uniform 
 all over the world, but rates of interest vary considerably between 
 different financial centres and this difference has an important bearing 
 on exchange. Under normal conditions, international money and 
 credit circulate most freely in the most attractive channels and a rise 
 in the interest rate in a foreign money market will accelerate the flow 
 of outside capital to that point; while, on the other hand, a fall in the 
 rate of interest will retard the flow. So, while demand and supply 
 govern rates of exchange, the rates of interest at home and abroad 
 react on these influences to govern demand and supply, their combined 
 effect causing the rates of exchange to fluctuate from day to day as the 
 floating capital of the world is attracted thus from one centre to 
 another. In all exchange calculations the rate of interest is based 
 on the current rate in the country on which the bill is drawn. The 
 reason for this is obvious, as money can always be obtained at once 
 for a good bill in the place where it is domiciled, subject to a deduction 
 of interest at the prevailing rate. For instance, a 60 day bill of 
 exchange, drawn on London, if sold there would be discounted at the 
 London market rate. If the London rate happened to be higher than 
 the New York rate, the New York banker would probably prefer to 
 allow the bill to run to maturity rather than to discount it in order 
 to use the proceeds in New York. If on the other hand, the London 
 rate was lower, the New York banker would discount the bill and 
 withdraw the proceeds for use in New York. 
 
 From the foregoing it will be seen that the London rate has a 
 powerful influence over exchange rates. The higher the rate of discount 
 the greater the disparity between the long and short rates of exchange 
 on London because the latter is not affected to as great an extent, a 
 short -bill being payable on presentation, yet the effect of the rise 
 in the rate of interest in London is immediately reflected in the price 
 of any bill. 
 
 The movement of gold from one country to another, or even the 
 probability of such a movement, is an important factor in determining 
 the rates of exchange on the countries affected, and London, owing 
 to the extreme sensitiveness of the Bank of England rate to gold 
 movements, is particularly interested in its discount rate. Suppose, 
 
80 Notes on" Foreign Exchange. 
 
 for instance, on account of a low sterling rate New York commences 
 to import gold from London. The Bank of England, seeing its stock 
 of gold becoming too low, raises its official rate of discount, which is 
 the term applied to the minimum rate at which the Bank of England 
 will discount approved bills. The London market, whose rate is 
 usually a little lower than the Bank of England rate, will probably 
 rise in sympathy, but if it does not do so the Bank of England, by 
 borrowing money itself in the open market, forces the rate up and the 
 effect of dear money is soon apparent. The foreign money markets, 
 in order to take advantage of the higher interest rate in London, will 
 allow their balances to accumulate there for investment or will purchase 
 bills on London. British merchants will decrease their imports and 
 increase their exports so that the balance of payments gradually swings 
 round again in favour of Great Britain. Exports of gold, therefore, 
 cause sterling rates in New York and elsewhere to stiffen and if the high 
 interest rate is maintained sufficiently long it will check the export and 
 eventually induce an inflow of gold to London. The Bank of England 
 reserves will again become normal and the rate will then be reduced. 
 The importance of the Bank of England rate in controlling international 
 exchange and gold movements cannot be over-estimated, and its 
 effects are so far reaching that monetary conditions throughout the 
 world are directly or indirectly influenced by it. The rate is fixed by 
 the Directors of the Bank on Thursday of each week and though 
 changes are made as infrequently as possible, the publication of the rate 
 is always a matter of interest to the financial world. It has been said 
 that the rate acts as a barometer of the financial conditions of the 
 nations and any features of political or financial significance are- 
 reflected by its course. A. W. Margraft*, in pointing out the import- 
 ance attaching to the fluctuations of the discount rate of the Bank 
 of England, tabulates the various interests which are affected thereby 
 as follows -.-^ 
 
 1. Establishes the minimum rate at which the Bank of 
 England will discount acceptable paper. 
 
 2. Fixes the rate of interest allowed by London joint-stock 
 companies, on short deposits, since this rate is one and one-half 
 per cent, under the Bank of England rate. 
 
 3. Determines the rate of interest allowed by London bankers 
 on cash balances to the credit of foreign correspondents, keeping 
 active accounts with them, in so much that this rate is usually 
 3/2 to 1% below the Bank rate. 
 
 4. Serves also to fix the rate of interest charged on cash 
 overdrafts, on running accounts, as debit balances arc generally 
 subject to the Bank rate, or 3^ to 1% above, according to agree- 
 ment. 
 
 5. Establishes the open market discount rate in Great Britain 
 at which private bankers, London joint-stock companies and 
 
 *International Exchange by A. W. Margraff. 
 
Rates of Interest 81 
 
 discount houses will discount paper for local or foreign account, 
 the rate ordinarily being from }/i to }/^% below the Bank rate. 
 
 6. Governs the "Retirement Rate of Discount" on docu- 
 mentary payment bills, which is the rate of interest rebated to 
 the drawee, or acceptor of a documentary payment bill for the time 
 from the date of retirement or prepayment to the date of maturity 
 of the bill, this rate being 3^% above the rate of interest allowed 
 by London joint-stock companies for short time deposits, which 
 rate is based on the Bank rate as above. 
 
 7. Affects the value of all international bills of exchange as 
 an advance in the Bank rate either advances the rate of exchange 
 for a demand sterling draft in a foreign country or depreciates the 
 worth of a long time sterling bill, as the interest rate for credit 
 balances and the discount rate for long time paper are indirectly 
 dependent upon the Bank rate. 
 
 8. Has the power of protecting the gold reserve held by the 
 Bank of England and of checking any protracted movements of 
 gold importations by foreign nations, in so much as an advance 
 in the Bank rate adjusts the rates of foreign exchange to a point 
 where operations of this nature become unprofitable. 
 
 9. Invites and attracts the deposits of foreign banks with 
 London correspondents as an advance in the Bank rate to a figure 
 in excess of the earning capacity at home induces continental 
 money lenders to seek the London market for investment of their 
 funds. 
 
 10. Indirectly has a tendency to depress or advance the values 
 of stocks listed on the New York Stock Exchange — an advance 
 in the Bank rate causing a decline in stock values, and a reduction 
 in the Bank rate usually having the opposite effect, because the 
 values of stocks are largely dependent upon the monetary con- 
 ditions obtaining in New York, and as New York bankers in periods 
 of stringency, nowadays, resort to relieve the situation by issuing 
 Finance Bills drawn upon English bankers, the Bank of England 
 rate indirectly either facilitates or precludes their course of action. 
 
 The Bank of England is at all times fully prepared to make 
 advances against satisfactory collateral, or re-discount approved 
 acceptances at its minimum rate of discount. Facilities of this nature 
 naturally create a feeling of stability and confidence among the English 
 bankers, and the protection and assistance at their command in times 
 of emergency enables them to conduct their business safely on a smaller 
 cash reserve basis than is possible by bankers in countries without 
 similar protection. 
 
CHAPTER XII 
 
 ARBITRAGE 
 
 Arbitrage, or indirect exchange as it is sometimes called, is thus 
 defined in the Century Dictionary: "The calculation of the relative 
 value at the same time at two or more places of stocks, bonds or funds 
 of any sort, including exchange, with a view to taking advantage of 
 favorable circumstances or differences in payments or other trans- 
 actions." The definition should also have included gold and, in a 
 general sense, any other commodity. For instance, wheat may be 
 sent from a place where it is relatively cheap, to a place where it is rela- 
 tively dear, this is arbitraging in wheat; high prices in one market 
 inducing shipments from markets with low prices and thus tending to 
 equalize prices. In the preceding section we have shown by simple 
 illustrations the manner in which the exchange rates between two places 
 are almost automatically adjusted and similar influences are brought 
 into operation to synchronize the exchange rates the world over. 
 There is thus a certain sympathy or relation between all foreign 
 exchange quotations. The quotations in New York, for instance, 
 for exchange on Berlin or Paris are largely influenced by the price of 
 sterling exchange. If the price of marks should fall in New York to 
 a point where there would be a profit in an arbitrage transaction, the 
 demand for drafts on Berlin by those who wish to make this profit 
 would almost immediately force the mark quotation up again. Simi- 
 larly New York, whilst a debtor to England with consequent high 
 sterling rates, may be the creditor of France or other countries in 
 Europe and drafts on these countries are remitted to London for credit 
 and thus tend to improve (i.e. lower) the rate of sterling exchange. 
 
 Arbitrage transactions are confined entirely to large financial 
 centres such as London, New York and Paris and require expert 
 knowledge and a close study of financial conditions, as it is essential 
 that the arbitrageur should be in daily, if not hourly, touch with the 
 varying conditions of the foreign money markets and their exchange 
 quotations and keep in touch with his foreign correspondents by cable 
 as to his intention so that they will be prepared to carry out a trans- 
 action without delay. 
 
 To give a concrete case of simple arbitrage we will suppose a 
 banker in New York has the following dat& before him: — 
 
 London cheque rate in New York $4.8560 per pound 
 Paris cheque rate in New York Fes. S.lGJs per dollar 
 
 Paris cheque rate in London Fes. 25.20 per pound 
 
 A brief calculation or a glance at his table of ^parities shows him that 
 
 *A parity is the price at which a bill should be quoted in order to compare 
 with the quotations for similar bills elsewhere. For instance, with the Paris 
 cheque rate in London at 2.5.20 and the cheque rate on London in New York at 
 4.85(50, the New York parity on Paris would be .5.189.5 as against the actual rate 
 above of 5.16L showing an opportunity of arbitrage profit of 2.07 centimes per 
 dollar (about 40 cents per $100). 40 cents per .$100 on $48,754^.56 =$195 as com- 
 pared with the actual profit shown on the transaction of $194.56. 
 
Arbitrage 83 
 
 there is an opportunity for a profitable arbitrage in francs between 
 London and New York. He therefore sells a draft on Paris for Fes 
 252,000 at 5.163>8 and with the proceeds buys a draft for £10,000 at 
 4.8560 per pound, at the same time cabling his London correspondent 
 to purchase a draft for Fes 252,000 at 25.20 per pound or better, and 
 send it to Paris to the credit of his account there. This purchase costs 
 £10,000 and is provided for by the draft for the same amount remitted 
 from New York. The banker's position is now as follows: — 
 
 Sale of francs 252,000 at 5.16j^ $48,754.56 
 
 Purchase of draft for £10,000 at 4.8560 to cover 
 purchase of Fes 252,000 in London at 
 25.20 48,560.00 
 
 Profit $194.56 
 
 Without using any of his own capital and without any expense except 
 the cost of a cable and a small commission to his London and Paris 
 correspondents, the banker has made a profit of over $190. The result 
 of this and similar transactions made by other New York bankers at 
 the same time would be to lower the New York rate for francs by 
 increasing the supply and to raise the London rate for francs by 
 absorbing the supply, thus tending to equalize rates all round. 
 
 The above is an example of arbitrage in its most simple form, but 
 is typical of transactions that are being continually made. The banker 
 might have found it more profitable to have provided cover for his 
 draft on Paris by remitting marks to Berlin and purchasing his francs 
 there, or he might have instructed his London correspondent to pur- 
 chase and remit a draft to Berlin with instructions to the Berlin bankers 
 to remit francs to Paris. In the first instance, he simply substitutes 
 Berlin for London in the transaction, but in the second instance he would 
 operate both through London and Berlin, four places are involved, 
 and the transaction is known as compound arbitrage. 
 
 The study of arbitrage transactions is both interesting and 
 instructive and the following example will bring out some of the 
 underlying principles more clearly: 
 
 Problem: It is desired to transfer $100,000 from New York to London 
 on the basis of the data given in the first column. Which method 
 of remittance should be selected? 
 
 It is first necessary to bring every quotation to a common 
 form; for example, how many dollars equal £1. Care must be taken 
 to bring quotations for long bills up to a cheque basis, allowing 
 for stamps, etc. The lowest number of dollars will be the cheapest 
 method. 
 
84 
 
 Notes on Foreign Exchange. 
 
 
 Factors 
 
 
 ♦Calculation 
 
 $ Price of £1 
 Cheque 
 
 ■ (Parity) 
 
 A 
 
 Berlin cheque in N.Y., Mk. 4 = 
 Berlin cheque in London, £l = Mk. 
 
 95c. 
 20.5 
 
 Sx = £l cheque 
 £1=20.5 Mk. 
 M.4 = .95 
 
 $4.86.87 
 
 
 x = $4.86.87 
 
 
 B 
 
 Cheque.N.Y. in Berlin SI =Mk. 
 Cheque Berlin in London £1 = i\Ik. 
 
 4.21 
 20.50 
 
 Sx = £1 cheque 
 £l=Mk. 20.5 
 M4.21=$l 
 
 $4.86.93 
 
 
 x=$4.S6.93 
 
 
 C 
 
 New York rate on Vienna, 20.30 
 per kronen 
 
 cents 
 
 $x = £l 
 £10=240.171^ 
 K. 1=20.30 cents 
 
 
 
 Vienna cheque rate on London, 
 '>4n 1714 kronen ner £10 
 
 
 $4.87.55 
 
 
 
 
 £10 =$48.75.5 
 
 
 ■D London cheque in N.Y. $4.87.60 
 
 E Cable transfers to London in New York 
 
 $4.8795 
 
 London discount rate 3% 
 
 F London 60 day cheque N.Y. $4.85 
 
 $4.87.60 
 
 $4.8795 less .0028 
 (7 days' interest 3%) 
 
 $4.87.67 
 
 $4.85 plus .0251 
 
 (63 days' interest 3%) 
 
 and stamps .0024 
 
 $4.87.75 
 
 G Cheque N.Y. in Paris $1 = Fes 5.16 J^ 
 Cheque Pairis in London £1 =Fcs 25.20 
 
 
 $.K 
 
 = £1 
 
 cheque 
 
 
 £1 
 
 = 25. 
 
 2 fcs. 
 
 F.5 
 
 1625 
 
 = $1 
 
 
 $4.88.13 
 
 x =$4.88.13 
 
 H Paris cheque in N.Y.,$1 = Fcs 5.15^ ... . 
 Paris cheque rate, London, £1 = Fcs. 25. 20 
 
 $x = £1 cheque 
 £l=25.2fc.chq. 
 F. 5. 15625 =$1 
 
 $4 . 88 . 72 
 
 x =$4.88.72 
 
 Most of the calculations in arbitrage transactions can be put in the form of 
 simple equations and require only correct reasoning for their solution. A quick 
 though mechanical method of calculation is chain rule, and consists of arrang- 
 ing the terms of the exchanges in the various currencies under consideration 
 in such a manner that the required equivalent is easily obtained. A study of the 
 examples of "chain rule" in the above column will make the method clear: — 
 
 Take the Berlin rate (A) 
 
 How many x = b 
 if b=c 
 and c =d 
 and d = Ix 
 
 $x = £l 
 
 £1=20.5 marks 
 Mks. 400 = $95 
 
 X = 
 
 1X20.5X95 
 1X400 
 
 = $4.86875 
 
Arbitrage 85 
 
 The last term is always in the same currency as the unknown quantity or 
 first term. It will be noted that these equations are arranged in such a manner 
 that the right hand of the first equation (b) is identical with the denomination 
 of the left hand side-of the second equation (b) and so on, and the denominations 
 follow each other like the links of a chain, hence the name. The value of the 
 unknown quantity (x) is then taken as a fraction, the quantities on the right 
 hand side forming the numerator and those on the left hand side, the denomina- 
 tor. The product of the numerator divided by the product of the denominator 
 will give the required answer. "Chain rule"^ is applicable to all kinds of exchange 
 and mercantile calculations. 
 
 How many dollars (x) =£1 
 
 If the weight of £1 = 123.274 grains standard gold 
 
 If 12 grains of standard gold =11 grains of fine gold 
 
 And if 232.2 grains of fine gold =$10 
 
 1X123.274X11X10 ^, _.-. 
 ^= 1X12X232.2 =$4.86656 
 
 A study of the above calculations shows that the cheapest method 
 of remittance would be through Berlin (A), a pound costing $4.86.87. 
 The transfer could be made either by forwarding a cheque on Berlin 
 to London or by instructing the Berlin correspondent to draw on New 
 York in favour of London. The sterling equivalent of $100,000 on 
 this basis would be £20,539 :3s. Od. 
 
 The dearest method of remittance is via Paris, the difference 
 between the Paris and Berlin rates being 1.85 cents per pound or $375 
 on a transfer of $100,000. The sterling equivalent of $100,000 on 
 this basis would be £20,461 :6s. Od. It should be noted that as the Paris 
 method is the dearest remittance it is the cheapest return and would 
 therefore be selected for the transfer of money from London to New 
 York. 
 
CHAPTER XIII 
 
 GOLD SHIPMENTS 
 
 The cost of a shipment of gold between any two countries can only 
 be estimated, as it varies with the size of the shipment and the facili- 
 ties and knowledge possessed by those who undertake it. Sometimes 
 special concessions are offered in order to encourage gold imports 
 into a country, and these materially reduce the expense of the ship- 
 ments by eliminating the loss of interest while the gold is in transit. 
 It is impossible, therefore, to give an exact figure, but relativ^ely 
 speaking, the gold points for sterling exchange vary from Ij^ to 2 
 cents per pound sterling. Gold shipments are made to and from 
 London and New York in several forms: — 
 
 Value in New York Value in London 
 per Ounce per Ounce 
 
 1 . Fine gold bars $20 . 671835 84 . 95416s. 
 
 2. Gold bars (900 fine).. . ) ,o ^/^^/.r r.n a re, a a 
 
 3. Eagles (900 fine).. . . . . ) 18-60465 76.458744s. 
 
 4. Standard gold bars, \ 
 
 (916% fine) J- 18.949182 77s. lO^d. 
 
 5. Sovereigns j 
 
 The Royal Mint in London pays the above prices a fortnight 
 after the gold is delivered to them, or the Bank of England will pay 
 immediately on delivery at the rate of 77s. 9d. per pound standard, 
 the difference of I3^^d. corresponding to about 4% interest on the 
 fourteen days' delay exacted by the Royal Mint. The L^nited States 
 Mint in New York pays 90% of the above prices on delivery of the 
 gold, and the remaining 10%, less a small melting charge of 4 cents 
 per $100, a few days later when the melting and assaying have been 
 completed. 
 
 Numerous examples of gold shipments can be found in any book 
 of foreign exchange, but the following examples of shipments made 
 from London during the year 1915 are of interest: — 
 
 Shipment of £100,000 in sovereigns from London to New York: — 
 
 September 29, 1915, shipped from London 
 
 October 12, 1915, 90% paid by Assay Office in New 
 
 York $435,500 . 00 
 
 October 18, 1915, 10% paid by Assay Office, repre- 
 senting 25,613.96 oz. standard gold at $18,949- 
 182 per ounce 49,867 . 53 
 
 $485,367.53 
 
Gold Stiipments 87 
 
 Forward i485.367.53 
 
 Less: Assay charges $ 27.04 
 
 Interest at 3)^% for 13 days on 
 
 $435,500 542.30 
 
 Interest at 3^^% for 19 days on $49,- 
 
 867.53 a^lAt 
 
 • Freight and insurance <i,i)i6.?iz ^ ^^^ ^^ 
 
 "4787163 . 54 
 
 £100,000 at cable rate on Sept. 29th, 4.73 1^ . . . . J73,250J)0 
 
 Net profit on the transaction $ 4,913.54 
 
 Delivery of the sovereigns was taken by tale and not by weight, 
 consequently, owing to the presence of short ^ifj «°J5^|"f'^^Ji^^ 
 shipment only weighed 25,613.96 ounces instead of 25,682. 18 ounces 
 had they been full weight, and only netted at the Assay office $4.85367 
 per pound! instead of $4.86656 or a loss of 1.89 cents per pound. 
 Even with this handicap the shipment netted a handsome profit. 
 
 Shipment of standard bar gold from London to New York:— 
 September 1, 1915, 5,282.157 ounces standard gold 
 
 purchased at 77s. lid. per ounce £2U,5/8.?S.i 
 
 September 10, 1915, 90% of value of above paid by 
 
 Assay office in New York on delivery $ 89,00U.UU 
 
 September 14, 1915, balance 10% paid by Assay ^^ ^^^ ^^ 
 
 office '■ '- — 
 
 Total amount paid by Assay office for the above 
 
 bars, assaying 4842.20 oz. fine gold at $20.671835 $100,097 . i« 
 
 Less: Assay charges qoqqa 
 
 Freight and insurance i,^»y.y-± 
 
 Interest at 33^% for 9 days on 
 
 $89,000 (Sep. 1-10) 77.00 
 
 Interest at 3i^% for 13 days on 13.81 
 
 $11,097.18 (Sep. 1-14) . . . IA^^.64: 
 
 Net proceeds received in New York. qq'qo^^o 
 
 £20,578. 8s. Id. at cable rate Sept. 1, $4 . 56 ^6,>i6i .bZ 
 
 ' Net profit on transaction $ 4,763.22 
 
 Standard gold at 77s. lid. per ounce is equivalent to $4 86394 per 
 pound, the nefcost of £1 was $4.79148 with cable at $4.56 or a net 
 profit of 23.148 cents per pound. 
 
 The following description of a shipment of $1,000 000 from 
 New York to London is given in Johnson's "Money and Currency 
 and will serve as an example of a shipment of gold made under normal 
 conditions: — 
 
^^ Notes on Foreign Exchange. 
 
 "During the last quarter of the nineteenth century the cost of 
 shipping gold from New York to London fell from three to two cents 
 per pound sterling. The charges for freight and insurance both 
 declined, while the increased speed of transatlantic liners reduced 
 the loss on account of interest. cuuceu 
 
 ''The following figures, showing the cost of shipping SI, 000 000 in 
 gold from New York to London, were furnished by the rep;esentative 
 of one of the largest New York banking houses: epresentative 
 
 Invested in fine bars, 23,200,000 gr. (48,375 oz.). .$1,000,000 00 
 Assay office premium on bars, 4c. per $100. . 400 00 
 
 Freight, 5/32 per cent ' ' ' ^ too kn 
 
 Insurance, 1/16 per cent a^inn 
 
 Packing and cartage .'.'.'.'.'.■.■.■.■ .' .' ." .' .' .' .' 7000 
 
 Total outlay $1^002^657^50 
 
 77 Tm/ ?''"'' °^ England's "price" of gold varies from 77s. 93^d. to 
 //_s. 10>id. per ounce, English standard, 916% fine. The mint 
 coins an ounce of gold, English standard, into 77s. lOi^d.; but the 
 Bank of England, with which it is the custom of bullion dealers to 
 deal, usually pays a fraction less than this sum, thus saving itself 
 from loss of interest while the bullion is being coined It is assumed 
 below that the bank pays 77s. lOd. per ounce assumed 
 
 48,375 oz. fine = 52, 772.7 oz., 916% fine 
 
 52,772.7 oz. at 77 s. 10 d £205,374 
 
 Deduct sundry expenses 4 
 
 Net receipts in London £205 
 
 370 
 
 Cost of sovereign (1,002,657.50-205,370) $4 8822 
 
 Mint par in United States 4.8665 
 
 Cost of shipment per sovereign $ .0157 
 
 .A ■ "J^^/^^^e.^ will notice that no loss on account of interest is includ- 
 
 hpM\h /°''^°"'g- • ^^'^ ^"^ ^^^^ b^"k^^ who furnished the figures 
 held that no such item was involved, for he sold sterling exchange 
 as soon as he made a shipment, and so was never out of money in 
 consequence. If we include interest for ten days at 3 per cent ($835 54) 
 we raise the cost of the shipment to $.0197 per sovereign ^*^'^^-^^^' 
 roin ''^j'^.^^nk of England usually pays per ounce for American gold 
 coin /7s. od., such coin being only 900 fine. As the Treasurv Depart- 
 
 coTfh^uT" ^ P''"''""' t' ^°'^ ^^'■^' '^ ^«"ld be cheaper to ship 
 Sinn Rnl ''TT "°,' '^^ ^T h^^^y ^« b^ underweight from abra 
 sion Bullion IS taken by weight and disposed of bv weight- but coin 
 
 clSeed 7r '/ H 1"' '"P°^'' ''' ^" ^°"^°" by --^gl'^t. Ihe'premium 
 charged for gold bars is to a certain extent offset by the finer assav in 
 England; the assay in the United States is on the basis of progress ons 
 of one fourth, while the assay in England is in decimals Cofn bdng 
 
Gold Shipments 89 
 
 packed in bags, is liable to some loss from abrasion in transit. One 
 of the largest New York shippers says he figures on a difference of 
 $.30 per $1,000 in favor of gold bars. 
 
 "According to another large bullion dealer in New York, the cost 
 of a shipment is even less than is shown above. He gives the items 
 as follows: premium on bars $.40 per $1,000; freight, 3^ of 1 per cent.; 
 insurance $.50 per $1,000; cartage, $1 per keg of $50,000; packing 
 $1.50 per keg of $50,000. On the basis of these charges, allowing for 
 ten days' interest at 3 per cent., the cost of a shipment of gold is $.0174 
 per sovereign." 
 
 Reference is made elsewhere to the assistance rendered by the 
 Bank of England in easing the abnormal exchange situation, at the 
 beginning of the war, by the establishment of a depository for gold 
 in Ottawa, and thus permitting shipments of gold from the United 
 States to the credit of the Bank of England in Ottawa, without the 
 risk and expense of ocean shipment in time of war. The minimum 
 transaction was established at $20,000, shipments to be accompanied 
 by a statement that the amount was to be held in trust for the Bank 
 of England by the Minister of Finance and Receiver-General of 
 Canada, Ottawa. On the gold being received and checked in Ottawa, 
 the Bank of England was advised by cable of the amount and to 
 whom the proceeds were to be paid in London under this arrangement. 
 Gold bars were accepted by the Bank of England in Ottawa at a 
 fixed price of 77s. 6d.*per ounce standard ($4.89 per£l) and United 
 States eagles at a fixed price of 76s. Oid.t per ounce ($4.8930 per £l). 
 Under normal conditions the Bank of England pays in London 77s 9d 
 per ounce for standard bar gold (or at the rate of $4.8744 per £l) and 
 
 * The value of an ounce of standard gold at the Royal Mint, London, is 
 £3: 17: 10 J^^ (£3.89375 or 77.875s) and the value of an ounce of standard gold 
 at the United States Mint is $18.949182, and the value of the sovereign in terms of 
 dollars can be determined by a simple sum in proportion: 
 
 If £3.89375 is worth $18.949182, how much is £1 worth? 
 
 i||S|?=»4. 86656 
 
 Fr^n this may be deduced that $18.949182 divided by the London price per ounce 
 for standard gold will give the equivalent rate £1. London paid £3: 17: 6 (£3.875) 
 per ounce for standard gold in Ottawa, therefore 
 
 18 949182 
 
 — n^Syr — =$4.8901 the equivalent per £1. The same result would 
 
 be obtained by dividing 378.98364 by 77.50 shillings. 
 
 t The value of an ounce of mint or eagle gold (9/10 fine) at the Royal Mint 
 is £3:16:5M (£3.822937 or 76.45875 shillings) and the United States mint pays 
 $18.60465 per ounce for bar gold nine-tenths fine and therefore 
 
 18.60465 ^. o««C« 1 r r--, 
 
 o g929 =^4.86656 per value of £1. 
 
 London paid £3.802 for eagle gold in Ottawa, therefore 
 
 r, QQ^ — =$4.8932 the equivalent rate per £1. 
 
 From this it will be seen that $18.60465 divided by the London price for mint gold 
 will give the dollar equivalent. The same result would be obtained by dividing 
 372.093 by the price in shillings. 
 
90 . Notes on Foreign Exchange. 
 
 buys United States eagles at about 76s. 4id. per ounce (or at the 
 rate of S4.8719 per £l) and the difference between the Ottawa and 
 London prices of 3d or 4d per ounce was most reasonable considering 
 it would barely cover the cost of shipment to London under normal 
 conditions. 
 
 No definite figures are obtainable as to the total amount deposited 
 in Ottawa by I'uited States bankers under this arrangement, but 
 it has been estimated at $110,000,000; nor are particulars a\ailable 
 as to the dates on which the gold was returned to New York after 
 sterling exchange became favourable to the latter. The greater part 
 of the deposit, of course, was shipped to New York from time to time 
 on account of the Bank of England itself, though some of it was re- 
 leased to London bankers and New York bankers against payments 
 made in London. 
 
 For instance, in the beginning of June when cables were $4.78875 
 the Bank of England released eagles in Ottawa against a payment in 
 London at the rate of 77s. Qhd. per ounce, equivalent to the rate of 
 $4.7985,* and at the end of June with cables at $4.7725 standard 
 gold bars were released at 79s. Id. per ounce, equivalent to the rate 
 of $4.7922.** 
 
 At first glance the above transactions do not appear to be very 
 profitable to the Bank of England as it paid $4.89 for standard gold 
 in August, 1914, and sold it at $4.7922 in June, 1915, while eagles 
 were sold at $4.7985 which cost $4.8930, but we must remember that 
 these quotations are movable exchange (dollars and cents per 
 pound) to London, and consequently the Bank of England followed 
 the old rule "Buy high, sell lower, "f and practicalh- makes a profit of 
 ten cents per pound sterling. 
 
 To make this clear let us take the h>'pothetical case of a New' 
 York banker who transferred $10,000 to England via Ottawa in 
 August, 1914, and transferred it back in June, 1915. 
 
 Aug. 13, 1914. — For the £10,000 paid to his account in 
 
 London he delivered in Ottawa in full weight eagles $48,930 
 
 June 5, 1915.— For £10,000 deposited in the Bank of ^ 
 
 England, he will receive at Ottawa in eagles $47,985 
 
 Gain to the Bank of England of $ 945 
 
 Had the transfer been made by cable at 4.78^ the banker would only 
 have received $47,887.50, so the Bank of England saved him $97.50 
 on the transaction. 
 
 The actual returns from se\-eral shipments made to New York 
 from Ottawa on London account during the summer of 1915 are of 
 interest. 
 
 *372. 093 ^77.5417 
 **378. 98364 -=-79,083 
 fSee Sections 5 and 90. 
 
Gold Shipments 91 
 
 1. Purchase of eagles in London by arrangement with the Bank 
 of England to release by cable the equivalent in Ottawa for shipment 
 to New York: — 
 
 June 2, 1915 — 11,666.915 ounces of eagles pur- 
 chased at 77s. Qjd. per ounce ($4.7985 per £) 
 delivery in Ottawa for shipment to New York £45,233-12-0 
 
 3 davs' interest at London call rate, 2%, 
 
 $35.57 7-8-7 
 
 Total cost in London £45,241- 0- 7 
 
 June 5, 1915 — Amount received in New 
 
 York $217,090 $217,090 
 
 (Average weight $10,000 eagles, 
 537.423 ounces) 
 
 Less charges, express, at 75c.. . .$162.90 
 
 - Custom fee 2. 10 165 
 
 Sterling equivalent of $216,925 
 
 at 4.78j^ rate on 2nd June in London for 
 
 cable transfer £45,298-18-0 
 
 Net profit on transaction £ 57-17-5 
 
 The Bank of England charged for the gold at the rate of $4.7985 per 
 pound, the net cost delivered in New York was $4.79487 per pound, 
 and the net amount realized by sale of cable in London was $4.78875, 
 yielding a net profit of .00612 per pound or $61.20 per £10,000. In 
 other words, each dollar cost the purchaser 4s. 2.053d., which he re- 
 sold at 4s. 2.1 17d. or a profit of about one-sixteenth of a penny per 
 dollar. 
 
 2. Purchase of bar gold in London, by arrangement with the 
 Bank of England to release by cable the equivalent in Ottawa for 
 shipment to New York: — - 
 
 September 23, 1915.— 10.988.101 ounces of standard 
 bar gold purchased at 80s. l^d. per ounce ($4.73 
 per £) delivery in Ottawa for shipment to New York £44,021- 1-5 
 
 Interest at 4}^% for five days (Sept. 23-28) 27-2-9 
 
 Interest at 43/^% on £996-11-0 ($4,693.75 at 4.71) 
 
 for seven days 17-3 
 
 Total cost in London £44,049- 1- 
 
 o 
 
92 Notes ox Foreign Exchange. 
 
 Forward £44,049- 1-5 
 
 September 28, 1915. — Paid by U.S. mint on 
 
 delivery $203,500.00 
 
 October 5, 1915. — Balance, less assay char- 
 ges, $22.27 4,693 . 75 
 
 Net amount from U.S. mint (being at 
 
 the rate of $18.949182 per ounce) $208, 193 . 75 
 
 Less express charges, etc 150.05 
 
 $208,043.70 
 
 Sterling equivalent at 4.71 cable rate on September 
 
 28th, in London £44,168-14-7 
 
 Net profit £ 119-13-2 
 
 The Bank of England released the bars at the rate of $4.73, the net 
 cost of same delivered in New York was $4.7228, and the net amount 
 realized by the sale of a cable on London was $4.71 per pound, yielding 
 a net profit on the transaction of 1.28 cents per pound. 
 
CHAPTER XIV 
 
 LONDON THE INTERNATIONAL CLEARING HOUSE 
 
 London has been for centuries the commercial Clearing House 
 of the world. This is due not only to its central situation, its free 
 trade and its immense mercantile navy, but also because it provides 
 facilities of such magnitude and of such entire efficiency for the final 
 settlement of exchange operations, that drawers or negotiators of bills 
 in every quarter of the globe give preference to sterling over any other 
 form of exchange. It has been estirhated that nearly 90% of all letters 
 of credit issued throughout the world are drawn in English money. 
 Lloyd George, in commenting on the unique and commanding position 
 of Great Britain in international trade and the consequent serious 
 responsibility placed upon her at the outbreak of the war, says: 
 
 . *"We had not merely our own business to run; we were an essential 
 part of the machinery that ran the whole international trade of the 
 world. We provided the capital to raise the produce; we carried half 
 the produce, not merely of our own country, but of the whole world. 
 More than that, we provided the capital that moved the produce 
 from one part of the world to another, not merely for ourselves, but 
 for other countries. 
 
 "I ask anyone to pick up just one little bit of paper, one bill of 
 exchange, to find out what we are doing. Take the cotton trade 
 of the world. The cotton is moved first of all from the plantations, 
 say, to the Mississippi, then it is moved down to New Orleans; then 
 it is moved from there either to Germany or Great Britain or else- 
 where. Every movement there is represented by a paper signed 
 either here in London or Manchester or Liverpool; one signature 
 practically is responsible for the whole of those transactions. Not 
 merely that, but when the United States of America bought silk or 
 tea in China the payment was made through London. By means of 
 these documents accepted in London, New York paid for the tea that 
 was bought from China. We were transacting far more than the 
 whole of our own business; we were transacting half the business 
 of the world as well by means of these paper transactions. What 
 is also important to establish is this: that the paper which was issued 
 from London has become part of the currency of commerce through- 
 out the world. 
 
 "It is remarkable how the whole of this huge business is done 
 with very little transfer of gold. London last year received £50,000,- 
 000 in gold and paid out £45,000,000. All the rest was paper. 
 What happened? All this fine, delicate paper machinery crashed 
 into a great war affecting more than half, and very nearly two-thirds 
 of the whole population of the world. Confusion was inevitable, 
 and undoubtedly there was very great confusion. It was just 
 as if one gave a violent kick to an ant-hill. For. a short time there 
 
 *Speech at the House of Commons, November 27th, 1914. 
 
94 Notes on Foreign Exchange. 
 
 'was much bewildering consternation in all the marts and exchanges, 
 "in the world. The top of the ant-hill was off, and for a moment there 
 "was great fright. All the material was there, but there was a very 
 "considerable panic, because war had never been waged by this country 
 "or any country in such conditions before." 
 
 Since the beginning of the war, there has been a great deal of 
 discussion in the financial papers as to the effect of the war on London's 
 position as a financial centre for the world. It is, of course, natural 
 that the serious interruption in shipping, commerce and exchange 
 through the world would minimize for the time being London's suprem- 
 acy, especially when the stupendous task of financing not only her own 
 war munition requirements but those of her allies devolves upon her. 
 There is no question that at the end of the war, New York's position as 
 an exchange centre will be much enhanced, but not necessarily at the 
 expense of London. Sterling and dollar exchange are the only two 
 mediums of exchange that have been at all reliable since the war 
 commenced and this will no doubt put both these exchanges im- 
 measurably ahead of the exchange of any other country at the end of 
 the war. 
 
 In considering the possibility of New York being a successful 
 rival for supremacy as an exchange centre, we can do no better than 
 review some of the principal reasons why London has hitherto held 
 that position, and it will be necessary for New York to duplicate these 
 in great part, if not in entirety, before London can be displaced. 
 These reasons can be briefly tabulated as follows: — 
 
 1. Excellent Geographical Position. 
 
 (a) On the threshold of Europe and within a short distance 
 of every important exchange centre with the exception of New 
 York. 
 
 (b) Ice and fog free water lanes to every large port in the 
 world, with the exception of New York and the other ports of the 
 North American continent. 
 
 (c) Insular position and consequent freedom from invasion 
 bv land. 
 
 2. Free Gold Market. — Which means that there is no delay 
 or discount entailed in realizing on a bill expressed in English money. 
 It is payable in pounds sterling, which represent a definite and immut- 
 able weight of fine gold. Great Britain adopted the gold standard 
 unequivocally in 1816, nearly 100 years ago and has not departed from 
 it since even to the extent of charging a fractional premium on the gold 
 or by restricting its export by legal or sentimental embargoes. So 
 important is this certainty of the English monetary standard to the 
 merchants and bankers of the world, that it is unlikely that the war 
 will cause more than a temporary recourse to other methods. 
 
 3. Pound Sterling. — The sovereign or pound sterling is the most 
 universalh" recognized coin as well as one of the largest units of money. 
 
 4. Mercantile Navy. — A mercantile navy second to none in the 
 world. This not only means a large toll of the world's commerce and 
 
London the International Clearing House 95 
 
 freight, but also enables Great Britain to govern to a great extent 
 the destination of cargoes. Incidentally, with her large ship owning. 
 Great Britain is interested in marine insurance and owing to the excel- 
 lent standing of her insurance companies, does an immense business 
 in foreign marine insurance. 
 
 5. Tariff. — The absence of a tariff, except on a few specific articles, 
 is of great importance as not only do foreign goods find a ready market 
 in Great Britain, but it permits British merchants and others to 
 import goods into Great Britain free of duty and export them at their 
 convenience. London and the other important sea-ports in Great 
 Britain correspond to the freight yards at railway centres. Cargoes 
 consisting of goods of every description pour into these ports from all 
 parts of the world and are there sorted into mixed cargoes to be 
 despatched to the various countries. 
 
 6. Banking. — The large number of foreign and colonial banks 
 established in London. 
 
 Although London does not encourage the establishment of foreign 
 banks, this freedom in banking privileges to all comers is an important 
 factor in ensuring the pre-eminence of London as a financial centre. 
 These branches of foreign banks with their network of correspondents 
 throughout the world, in addition to their direct influence on the 
 exchange situation, give invaluable assistance to the Bank of England 
 in preserving the equilibrium of the money market. 
 
 7. Discount Market. — A liquid money market capable of 
 absorbing bills of exchange to an unlimited amount. This unique 
 feature of the London market makes a first-class bill of exchange 
 almost as liquid as gold. The large number of foreign and colonial 
 banks referred to above form an invaluable factor in this discount 
 market. 
 
 8. Stability of Money Rates. — The discount rates are controlled 
 by a central institution, the Bank of England, and changes are not 
 only infrequent but seldom rise above 6%. By this control of the 
 money market, the Bank of England is able to attract gold to London 
 when the exigencies of commerce and the exchange situation require it. 
 
 9. Freedom from Panics and Financial Disturbances. 
 
 10. Foreign Investments. — Ability and willingness of Great 
 Britain to invest its large surplus income in foreign and colonial securi- 
 ties and enterprises. 
 
 The movements of such investments form a large part of the so- 
 called invisible exports and imports and are necessarily an important 
 factor in creating exchange. 
 
 IL Free Navigation Laws. — A foreign ship is in the same 
 position as a British ship with regard to British trade and foreign ships 
 engaged in the coasting trade are not subjected to higher rates than 
 British ships (141 Custom Law Consolidation Act, 1876). Great 
 Britain aft'ords equitable protection to both British and foreign seamen, 
 but a\oids emasculating the ser\ice by undue paternalism. 
 
96 Notes ox Foreign Exchange. 
 
 12. Rapid Mail Facilities. — Time is the essence of an exchange 
 transaction; a day's delay may turn a profit into a loss. Great Britain 
 is singularly well equipped in this respect. 
 
 (a) Railway Service. — Every main railway on the continent 
 of Europe gives its best service and equipment to its London mail 
 train. The Trans-Siberian Railway already gives access by rail 
 to the Pacific, and it is only a question of time to the establishment 
 of through connections with India, China and South Africa. 
 
 (b) Ocean Service. ^ — Great Britain has direct communica- 
 tion by fast steamers with every port of the world and consequently 
 acts as a foreign mail clearing house for other countries. 
 
 (c) Cable Service. — As Great Britain owns two-thirds of the 
 submarine cable mileage of the world, it is natural that she should 
 be a great cable centre with practically direct communication the 
 world over. This service is now supplemented by a far flurg 
 system of wireless stations. 
 
CHAPTER XV 
 BRITISH ACCEPTANCES 
 
 Reference has already been made to the enormous credits accorded 
 by London to bankers and merchants throughout the world. Such 
 credits generally take one of two forms, — acceptances granted under 
 letters of credit, and what are called finance bills. The latter class is 
 explained in the next chapter and the following illustration will afford 
 the best insight into the operation of the former. 
 
 When a merchant in Holland, France, the United States or any 
 other country wishes to buy goods, produce, etc., in any other part 
 of the globe, he generally obtains a credit through a London banker, 
 either direct or through a banker in his own country, and instructs 
 the foreign merchant from whom he purchases goods to draw on the 
 London banker at two or more months' sight. Take the case of a 
 coffee merchant in Bordeaux, Monsieur Bonhomme, who negotiates 
 with Gomez & Company, coffee growers in Rio de Janeiro, for a 
 consignment of coffee. Gomez probably knows little or nothing 
 about the financial standing of Bonhomme, and even if it were excellent, 
 would not be willing or able to await a remittance from France for the 
 shipment. He therefore asks Bonhomme to arrange for a credit 
 on London in his iavour for the amount of the invoice, say £1,000. 
 Bonhomme goes to his bankers, the Credit Lyonnais, at Bordeaux 
 and requests them to open up a credit in London in favour of Gomez 
 against 90 day bills with documents attached. The Credit Lyonnais 
 instruct Parr's Bank, their London correspondent, accordingly and 
 furnish Bonhomme with a letter of advice to send to Gomez stating 
 that the credit has been opened in London on the terms set forth. 
 On receipt of the letter Gomez fills the order and places the coffee on 
 shipboard; receiving a bill of lading therefor. He then draws a draft 
 at 90 days' sight for £1,000 and attaching the bill of lading, insurance 
 policy, invoice, etc., thereto, takes it to his banker, the Bank of Brazil, 
 who purchases the bill from him at the current rate of the day and he is 
 thus enabled to obtain his money immediately. The Bank of Brazil 
 forward the draft and documents to their correspondents in London, 
 the Bank of Commerce, who present it to Parr's Bank without delay. 
 The latter accept it, but retain the bill of lading and other documents, 
 which they forward to the Credit Lyonnais, Bordeaux, who thus are 
 enabled to obtain possession of the coffee when it arrives, and can either 
 store it on account of their customer Bonhomme, or deliver it to him 
 on trust receipt, until he finally pays f6r it. 
 
 To return to the draft — this is now an accepted bill with first- 
 class names on it, and has an international currency as it is saleable 
 in any country in the world, because every country finds it necessary 
 to remit to London constantly and every foreign bank has a London 
 office or correspondent. 
 
 The bill can be held until maturity and the proceeds then placed 
 to the credit of the Bank of Brazil, but the more likely course is for 
 the Bank of Brazil to instruct its Agent, The Bank of Commerce to 
 
98 Notes on Foreign Exchange, 
 
 discount it in the open market and place the proceeds to its credit, 
 or it may instruct its agent to remit the hill to another foreign centre 
 to settle some account there. In cither case the bill is in London at 
 its maturity and is paid on that date by Parr's Bank to the holder, for 
 in the meantime it may have been bought and sold several times and 
 passed through half a dozen hands. 
 
 Parr's Bank depends on the Credit Lyonnais to provide funds to 
 meet the bill at maturity and would not have issued the credit unless 
 they had confidence in them. The Credit Lyonnais in their turn have 
 confidence in their customer's ability to reimburse them and of course 
 see to it that he provides the necessary funds for transmission to London 
 in ample time to discharge the obligation. 
 
 To sum up the results of the transaction; 
 
 1. Bonhomme, the actual debtor, had the use of £1,000 for 
 three months and yet he himself would probably have some 
 difficulty in naming his actual creditor at any particular moment. 
 
 2. Gomez & Company, in Rio de Janeiro, received their money 
 as soon as the coffee was delivered on shipboard, though as 
 drawers of the bill, they remain obligants until payment. 
 
 3. The Bank of Brazil bought the bill from Gomez and were 
 only out of their money until the bill had reached London and 
 was accepted, discounted and placed to their credit. They, how- 
 ever, remain liable as endorsers of the bill until its payment. 
 
 4. The Bank of Commerce advanced no money as they acted 
 only as agents of the Bank of Brazil in obtaining acceptance 
 of the bill, selling it in the discount market and crediting the 
 proceeds: therefore their name does not appear on the bill. For 
 their services they receive a commission. 
 
 5. Parr's Bank are primarily liable on the bill as acceptors 
 but as the Credit Lyonnais must provide the funds for payment 
 they advance no money on the transaction, merely making a small 
 commission for the use of their name. 
 
 The above are all interested directly or indirectly in the bill but 
 not one of them, with the exception of the Bank of Brazil has advanced 
 a single cent, and the question still remains, "Who paid for the coffee 
 during the three months' currency of the bill?" The answer is — The 
 firms in the open discount market of London, who discounted and 
 purchased the bill. 
 
 In the same way merchants in e\cry countr\' in the world have 
 been accustomed to arrange similar credits in London for every other 
 country in the world and for every concei\ablc class of goods. On 
 the outbreak of war it is estimated by Mr. Lloyd George that British 
 banks and accepting houses were liable for over £350,000,000 of these 
 acceptances, the greater part of which had been discounted on the 
 London market. Although British signatures were primarily liable 
 for this huge amount, it was not really for their own account, but they 
 looked to those on whose behalf they had accepted the bills to provide 
 the funds, and the unprecedented demand for sterling exchange at the 
 
BkITISII AcCEl'TAXC'ES 99 
 
 beginning of the war was due to the attempt on the part of these 
 foreign obligants to provide funds for the maturing liabilities incurred 
 by the British banks for their account, and under their instructions. 
 Exchange rates on London the world over rose far above the gold point, 
 New York sterling exchange, for instance, was quoted as high as $6.50 
 and $7.00 per pound sterling for cables as against the normal $4,863^. 
 If Great Britain had insisted on these debts being paid immediately, 
 it would probably have been impossible to obtain the necessary sterling 
 funds except at a most ruinous figure, and, even if the English banks 
 could have met the acceptances out of their own funds as they matured, 
 it would have brought disgrace if not ruin on a number of the foreign 
 banks. It was to protect this vicarious liability of the English banks 
 that it was deemed advisable to proclaim a moratorium, and there is 
 no doubt that this wise step saved the neutral countries, which were 
 indebted to London both financial loss and worry. Lloyd George in 
 referring to this class of note says: 
 
 "There was that amount of paper out with British signatures at 
 "that time. Most of that had been discounted. The cash had 
 "been found by British sources, and the failure was not due to 
 "the fact that Great Britain had not paid her creditors abroad. 
 "It was due entirely to the fact that those abroad did not pay 
 "Great Britain, I think that it is very important from the point of 
 "view of British credit, to have that thoroughly understood, for 
 "when the Moratorium came, and there appeared something like 
 "a failure of British credit, it was not a British failure at all. It 
 "was because we could not get remittances from other countries. 
 "We had already paid, but it was vital to the credit and good name 
 "of this country that these bits of paper, which are circulated 
 "throughout the globe, with British names upon them, with names 
 "that have been associated with British trade and commerce — it 
 "was vital to the good name and credit of this country, to its 
 "continuity of trade and its character, that they should not be 
 "dishonoured. What really happened was that there was a 
 "complete cessation of credit, a breakdown of the exchanges. 
 "It was exactly as if a shell had broken an arch in an aqueduct, 
 "and there was a cessation of the flow that had been going on 
 "before, and what we had to do was temporarily to repair the arch 
 "so that the flow should continue." 
 
 Acceptances under Letters of Credit are not, of course, confined 
 to London, but are drawn on other large financial centres such as 
 Paris, New York, etc., but owing to the special facilities afforded by 
 London the bulk of these credits are drawn in sterling. 
 
 Dollar credits issued on New York have, since the beginning of 
 the war, become more generally used especially for South American 
 business, but it is doubtful if they w^ill more than temporarily take 
 the place of the better known sterling credits, for the reason stated 
 above.* 
 
 Chapter XIV. 
 
CHAPTER XVI 
 FINANCE BILLS . ' 
 
 There is a wide difference of opinion as to the exact definition of 
 a finance bill. Franklin Escher defines it as "an unsecured long bill 
 of exchange drawn by a banker in one country on a banker in another 
 country, and sold for the purpose of raising money." Other authori- 
 ties are inclined to include all long bills originating between bankers, 
 whether secured or not. The latter is perhaps the more general under- 
 standing of the term, and I would suggest the following definition as 
 comprehensive: — "A finance bill is a long bill of exchange, secured or 
 otherwise, drawn by a banker in one country on a banker in another 
 country, the funds for the payment of which at maturity must be pro- 
 vided by the drawer." 
 
 Before drawing a finance bill it is necessary to make arrangements 
 with the accepting bank as to the amount, terms, etc., of the accom- 
 modation. Siich arrangements can, of course, be general, applying 
 to a series of transactions, or specific and applying to a single trans- 
 action only. The most common occasion for the use of these bills is 
 to anticipate a fall in the exchange rates. For instance, during the 
 summer months, under normal conditions, the rate of exchange for 
 sterling in New York is generally high, gradually dropping to a very 
 much lower level in the fall, when the large shipments of cotton and 
 wheat result in heavy offerings of sterling exchange. Suppose the 
 rate at the end of August is 4.88 for demand bills and a banker, "A," 
 desirous of anticipating the probable drop in exchange in the fall, 
 arranges with his London correspondent, "B." for a credit of £10,000 
 by way of 60 days' draft on London against securities which he de- 
 posits with him. "A" immediately draws a draft on "B" at 60 days 
 for £10,000 which he can either (1) sell in New York at the sixty day 
 rate for bills or else (2) send to London to be placed to his credit 
 there, and sell his own sight drafts against this credit; in either case 
 he will have the use of the proceeds in New York until the maturity 
 of the bill, when he must be prepared to place "B" in funds to meet 
 it. It will be noticed that "B" advances no money, but simply 
 lends his name to "A," the London discount market pro\iding the 
 funds. 
 
 (1) "A" will sell his sixty day bill in New York if he can obtain 
 S4.8523 per pound sterling or better. This rate is arrived at as fol- 
 lows : — 
 
 Demand rate for sterling $488. 
 
 *Less 63 days' interest at 3% (being 
 the London market rate for prime 
 
 bankers' bills) 2 . 527 
 
 Stamps 1 20 of 1% .244 2 . 771 
 
 Per £100 $485,229 
 
 or $4.8523 per pound sterling. 
 
 *Prior to the war interest and stamps used to be calculated on the basis of 
 $485 to the £100, but owing to the wide fluctuations it is now frequently calculated 
 on the actual rate itself. 
 
Finance Bill^-' 101 
 
 The sixty day bill for £10,000 should therefore net 
 
 him $48,522 . 90 
 
 "A" employs these funds in New York for sixty 
 
 days at 4%, earning 343.49 
 
 Seven days before the bill matures "A" purchases a 
 
 demand draft for £10,000 which he forwards to $48,866 . 39 
 London to provide for the payment of the bill. 
 By this time exchange has fallen as he antici- 
 pated, and is now at 4.85, so that he is able to 
 buy the covering draft for 48,500 . 00 
 
 "A's" profit (from which must be deducted "B's" 
 
 commission of probably 3^ of 1%) is therefore $ 366.39 
 
 There is, of course, the risk that exchange might not fall at the 
 end of October as anticipated, or that the interest rates in New York 
 might not be maintained above 3%. 
 
 (2) If "A" sent the sixty day bill to London and immediately 
 sold a demand draft against the remittance, the transaction would 
 work out as follows: — 
 
 Amount of 60 days' draft £10,000 
 
 Less interest at 3% £51 . 781 
 
 Less stamps, 1/20 of 1% 5. 
 
 56.78 
 
 Net proceeds in London £ 9,943.22* 
 
 "A" would thus be in a position to sell his demand draft for the 
 above amount and thus provide himself with funds in New York, 
 £9,943.22 at 4.88 = $48,522. 90, the same amount as realized in (1) 
 by the sale of the sixty days' bill itself in New York. 
 
 Another form of finance bill is created when a London banker, 
 desirous of taking advantage of the high rate of interest in New York, 
 instructs his correspondent to draw on him for £10,000 at sixty days, 
 and lend the proceeds on the New York market. This the New 
 York banker does, and sells the bill in New York, investing the money. 
 Neither banker employs his own money in the operation, the money 
 being provided by the London market, where the bill is discounted 
 by the purchaser. A transaction of this nature may be entirely on 
 the account of and at the risk of the London banker, or it may be on 
 joint account, in which case both the risk and the profit are shared. 
 
 There are, of course, finance bills, both secured and unsecured, 
 drawn purely for raising money regardless of the conditions of interest 
 
 *The net proceeds, £9,943.22, are taken for the amount of the demand draft 
 for illustrative purposes; in actual practice the draft would have been drawn 
 in round figures, £10,000. The same result would be obtained, thus: — 
 
 £10,000 demand draft realizes in New York $48,800.00 
 
 from which must be deducted the London charges for 
 
 interest and stamps, £56.781 at $4.88 277.09 
 
 $48,522.91 
 
■"*- XoTFS OX Foreign Exchange. 
 
 or exchange, but as a rule finance bills have a reasonable excuse for 
 their existence. It may be objected that this is a way of getting 
 
 hZL rtT^^'l ^' '"f^^^ -"^"f^"' ^"^ ^" P-^^-^ this do^es no? 
 happen. The London market is always uncannily in touch with the 
 
 position o both the drawer and acceptor and any attempt on the 
 part of either to issue this class of bill beyond what he is legitimately 
 entitledto on the basis of his business or financial standing fs^rompdy 
 nipped in the bud, first, by demanding higher rates and Inalh iTre^ 
 fusing to take the paper. Either action is, of course detrimentyto 
 the credit of the party concerned, and bank;rs and others who ope a ^ 
 in finance bills are most careful to leave a large marein of safetv in 
 their use of the very sensitive discount market ^ ^ '" 
 
 If, at the maturity of a finance bill, it is not convenient to remit 
 
 sale ^or^nol'e? I^l'^ " ^^^^^'^ ^^^ ^^^^-->' ^^^^ - --^ ^ ^^^h^e 
 It is plain from the above explanations that when manv of these 
 finance bills are drawn on London by thus increasing the supp y of 
 be sow.' -' "'" ^""' " ''"^^"^>' ^° ^°^'^^ ^he rate at which they can 
 In the above illustrations London and New York alone have been 
 re erred to; finance bills, of course, obtain between other countries 
 but to a much less degree. v^uuuLneb, 
 
CHAPTER XVII 
 
 WAR AND EXCHANGE 
 
 GREAT BRITAIN 
 
 During the first week in August, financiers were faced with con- 
 ditions that were absolutely unprecedented, conditions to which 
 the generally accepted remedies and economic theories were inapplic- 
 able. The very perfection of the international credit machinery, 
 with its vast network of telegraphic nerves radiating from London, 
 New York, Paris and other financial ganglia, was a factor in its own 
 undoing. Cable communication was almost cut ofi by the destruction 
 of some of the cables and by the establishment of censorships, and 
 the little news that did succeed in filtering through was almost un- 
 believable, so terrific was its significance. Events followed each 
 other in rapid succession. Austria declared war on Servia on July 28th ; 
 Russia, Germany and France began to mobilize. On July 30th the 
 Bank of England rate rose to 4% and on July 31st to 8%. On the 
 same day, unable to withstand the flood of continental liquidation, 
 the London Stock Exchange closed and was closely followed by the 
 New York Stock Exchange and by every Bourse in the world. On 
 August 1st Germany declared war on Russia and the Bank of 
 England rate was raised to 10%; on August 3rd Germany declared 
 war on France and this was followed by a run on the Bank of England. 
 On August 4th England declared war on Germany. Europe was 
 panic stricken, specie payments were suspended and moratoria were 
 declared everywhere. For a time all was confusion, until the energetic 
 and courageous action of the British Government assisted by the 
 remedial measures resorted to at other exchange centres, brought 
 some order out of chaos and to a certain degree restored confidence. 
 
 At the beginning of the war the majority of the countries of the 
 world found themselves with a large amount of floating and maturing 
 indebtedness to provide for in London and without any machinery 
 for accomplishing it, except at an almost prohibitive loss. So de- 
 pendent had the world become on the facilities offered by London 
 and other large European centres for the adjustment of their trade 
 balances between each other, that the complete breakdown in the 
 exchanges left them with no channels whereby they could offset these 
 balances except by direct settlement, either liy gold shipments or the 
 purchase of exchange in a debtor country for remittance to a creditor 
 nation, both costly methods. Conditions were further complicated 
 by the uncertainty of communication and the almost complete cessa- 
 tion of merchant shipping throughout the world owing to interment 
 or commandeering. For these and other reasons one country after 
 another declared a moratorium of a more or less general nature. 
 Among these may be mentioned: — 
 
104 
 
 Notes on Foreign Exchange. 
 
 Country date 
 
 Argentina August 12th 
 
 Belgium " 6th 
 
 Brazil " 16th 
 
 Bulgaria " 7th 
 
 Denmark " 21st 
 
 Ecuador " 7th 
 
 Egypt " 9th 
 
 Greece July 26th — August 4th 
 
 Italy August 4th 
 
 Norway " 5th 
 
 Paraguay " 14th 
 
 Portugal " 24th 
 
 Russia July 20th — August 2nd 
 
 South Africa September 15th 
 
 Sweden ; August 7th 
 
 Switzerland " 17th 
 
 Turkey " 3rd 
 
 Uruguay " 15th 
 
 A study of the following table shows the \alue of the pound 
 sterling in different countries from July 1914 to January, 1916. A 
 comparison of these rates with the par value of the pound in the first 
 column will show when the London exchange was at a discount. 
 
 Par 
 
 July 17, 
 1914 
 
 August to 
 December, 1914 
 
 High Low 
 
 1915 
 
 High 
 
 Low 
 
 Jan. 15, 
 1916 
 
 Paris 
 
 Switzerland. 
 
 Italy 
 
 Madrid .... 
 Amsterdam. 
 Petrograd . . 
 Scandinavia. 
 New York. . 
 
 Fes. 
 
 Fes. 
 
 Lire 
 
 Pes. 
 
 Fl. 
 
 R. 
 
 K. 
 
 25.22 
 25.22 
 25.22 
 25.22 
 12.107 
 94:60* 
 18.16 
 4.863^ 
 
 25.17 
 25.18 
 25.26 
 26.05 
 12.12 
 95.10 
 18.25 
 4.87K 
 
 25.50 
 26. 
 28.50 
 26.80 
 12.60 
 125. 
 19.30 
 6.50 
 
 24. 
 24. 
 24. 
 24.25 
 11.70 
 108. 
 18.30 
 4.87 
 
 27.80 
 25.85 
 30.90 
 25.55 
 12.15 
 149. 
 19.55 
 4.85K 
 
 25.08 
 24.80 
 25.87 
 23.90 
 11. 
 110. 
 16.60 
 4.50 
 
 27.85 
 24.75 
 32.35 
 25.05 
 10.85 
 161.50 
 
 17.37H 
 
 4.773^ 
 
 It will be noticed that by January, 1916, the positions at the 
 beginning of the war had been reversed in most instances and Great 
 Britain, formerly the general creditor nation, had become a debtor 
 to Switzerland, Spain, Holland, Scandinavia and New York, this 
 being due in great measure to a decrease in her exports and foreign 
 investments and an increase in her imports, principally of proxisions 
 and war supplies. 
 
 When war became imminent, France proceeded to realize on her 
 securities and call in her foreign balances; as a result, funds in Lon- 
 don and New York were rapidh' exhausted and debtors in London 
 who were under oI)ligation to remit to Paris, sent gold unlil I he mora- 
 torium was declared. There were practicalK' no (]uotations until 
 
 *Roubles per £10 for 3 months' bills; the other quotations are for sight bills. 
 
AVar and Exc'Haxge 
 
 105 
 
 the middle of August, by which time the rate had fallen to Fes. 24.50, 
 rising again in September to Fes. 25.70, and falling to Fes. 25.04 in 
 December, 1914. In the spring of 1915 the effects of heavy financing 
 of the British Government for French account commenced to be felt 
 and by June the quotation had risen to over Fes. 26., standing in Janu- 
 ary 1916 at Fes. 29.85, — this, notwithstanding the heavy expenditures 
 on the British and Canadian troops entrenched in France and Flanders. 
 No specific particulars regarding the exchange or financial opera- 
 tions of neutral countries are obtainable, nor will they be until after 
 the war is over, for obvious reasons. It is, therefore, idle to attempt 
 to explain the position of the foreign exchanges except in general 
 terms, as the several rates do not by any means represent either the 
 financial positions of the countries in question or their true relation 
 to each other. Take, for instance, the case of Holland, which appears 
 for the time to have taken London's place as international clearing 
 house. According to the "Economist" the Amsterdam exchanges 
 stood as follows in November, 1915: — 
 
 Premium on 
 Rate Par Dutch Currency 
 
 Berlin 48 . 021^ 59 . 26 19 . 
 
 Vienna 34 . 06^ 50 . 41 S2}4 
 
 Copenhagen 63.65 66.437 4^^ 
 
 London 11.22 12.11 7^ 
 
 New York 239 . 65 248 . 8 3^ 
 
 It will be noticed that even the dollar is at a discount and Dutch 
 currency has apparently become the standard of value for these centres 
 and the exchange markets of Holland and Scandinavia have become 
 of importance as international clearing houses, for the time being 
 taking the position generally occupied by London. 
 
 The par rate between Amsterdam and London is Fl. 12.107 to 
 the pound sterling, and the rate obtaining just before the war was a 
 little in favour of London, F. 12.14. During the first week of August 
 the quotations were most irregular, ranging as they did from Fl. 11.90 
 to Fl. 12.60, but after the steadying of the exchanges by the remedial 
 measures above referred to; the rate on London was fairly well main- 
 tained around normal, until 1915, when payments for freight and 
 large purchases by the British Government of sugar and other sup- 
 plies, together with the sale of securities in New York and London, 
 presumably for German account, combined to lower the value of the. 
 pound to Fl. 10.85, the quotation on January 15th, 1916. 
 
 Since the beginning of the war, the Italian exchange has been 
 favourable to London, and during the summer and fall of 1915 stood 
 at about Lire 26. The rate dropped a little in December but rose 
 again on the prospect of Italy's participation in the war, and stood 
 at about Lire 28 until June, 1915, from which time it has been gradu- 
 ally rising, and on January 15th, 1916, reached Lire 32.35. 
 
 The Russian rate of exchange before the war stood at about 94 
 roubles per £10. Since then the rate has gone steadily against Russia. 
 This is due to the almost complete blockade of Russian exports, both 
 
lOf; Notes on Foreign Exchange. 
 
 from the Black Sea and the Baltic, and to a large increase in the 
 value of imports. A certain amount of this depreciation is due to 
 the expansion of the paper currency. 
 
 Spain was favourably affected by the war as far as exchange 
 conditions were concerned. Sterling exchange is almost inxariably 
 at a premium in Spain. Just before the war it stood at 26.10 pesetas 
 per pound sterling (par 25.22) and during the first part of August 
 fluctuated between Pesetas 23.85 and Pesetas 26.()() per pound, the 
 higher quotation being, of course, in favour of Great [Britain. Heavy pur- 
 chases by France and England of war munitions and provisions turned 
 the exchange in favour of Spain, where it has remained ever since, 
 and England has even found it necessary to shiji gold to Spain from 
 time to time in order to keep the rate adjusted. .A stud\' of Spanish 
 foreign trade returns shows a great decline in imports and a large 
 growth in exports. New industries appear to have been started all 
 over the country for the manufacture of goods previously imported 
 from England and elsewhere. These industries have been greatly 
 aided by a return of skilled workers from the belligerent countries. 
 Barcelona has been particularly active in supplying war munitions of 
 all descriptions to France, while both France and England at present 
 afford an unlimited market for the products of the new industries so 
 recently started, such as blankets and cloth, jams, marmalades, etc. 
 
 The position of the Scandinavian nations, Norway-, Denmark and 
 Sweden, was very similar to that of Holland, being contiguous to 
 both Great Britain and Germany. Under normal conditions the 
 Scandinavian nations are generally indebted to Great Britain, and 
 at times lean heavily on London for financial assistance. At the 
 beginning of the war exchange was in favour of London, standing at 
 K. 18.25 as against the par of K. 18.16, and remained favourable 
 well into 1915, when it fell as low as K. 16.60. The fall was due to 
 a number of causes. England's exports to these countries had practi- 
 cally ceased, while her imports' from them had increased. Russian 
 purchases in these countries were paid b\- draft on London and large 
 amounts were also due from Great Britain for freight, etc. 
 
CHAPTER XVIII 
 WAR AND EXCHANGE iConfinued) 
 
 NORTH AMERICA 
 
 A study of the following average quotations for the successive 
 months of the years 1906-10,* as well as of the table on page 109, shows 
 that exchange invariably favours London during the first eight months 
 of the year: — 
 
 January 4.872 
 
 February 4.875 
 
 March 4.8725 
 
 April 4.8715 
 
 May 4.875 
 
 June 4.876 
 
 July 4.872^ 
 
 August 4.8685 
 
 September 4.866 
 
 October 4.8665 
 
 November 4.8695 
 
 December 4.869 
 
 This is due to_ the adverse trade balance, but during the month of 
 July, 1914, this usual adverse balance was still further augmented 
 by the abnormal quantity of American stocks and bonds sold on the 
 New York Stock Exchange for European account. This selling was 
 increased by the closing of the European Bourses, until finally the 
 closing of the London Stock Exchange on 30th July, caused the New- 
 York Stock Exchange to follow suit in self-defence on the following 
 day. 
 
 Thus at the beginning of the war New York found itself with an 
 unprecedented floating indebtedness to Europe, variously estimated 
 at from $250,000,000 to $300,000,000, and exchange became utterly 
 demoralized. Cables on London rose to $5, to $6.50 and finally to 
 $7, and remittances became impossible. 
 
 Gold had been leaving New York for Europe in large quantities 
 during the month, and more would have been shipped but for the 
 suddenness of the crisis. Even as late as July 28th, 1914, the "Kron 
 Prinzessen Cecilie" sailed from New York with a consignment of gold 
 valued at over $10,000,000, but to avoid capture was recalled when 
 almost in sight of England and put back into Bar Harbour, Me., on 
 4th August, 1915. 
 
 Gold shipments were now impracticable, not only on account of 
 the high war insurance rate of 1%, but also because it was not consider- 
 ed advisable or expedient, even for neutral nations, to ship gold in 
 war time. Every nation was holding gold for eventualities — they 
 knew not what. Under normal conditions New York would have 
 corrected this abnormal exchange position by anticipating the fall 
 
 ♦Compiled by Mr. Lawrence M. Marks, Yale, '14, and published in Inter- 
 national Trade & Exchange by H. G. Brown. 
 
p 
 
 ? ! ?— » S 1 c i ? ! i S ' ii 
 
 5 
 
 ■f "£ i 2 ^ ^ ^ ^' ^ r^ = ? = ^ H ^ ^ s : : ^ s s : 
 
 tS^V F ; * 5 J ; i ^ ^ J * t * ;^ 2 ^ ^ ^ - " " i 1 
 
 if 
 
 H 
 
 7 
 
 W-? 
 
 fi-C 
 
 - 
 
 — 
 
 ~ 
 
 ^4 "^ 
 
 \ 
 
 •»■ 
 
 .-, \ft 
 
 
 « 
 
 - <y 
 
 '5- 
 
 T 
 
 V 
 
 -1— 
 
 r 
 
 i 
 
 ^ i 
 
 :- 
 
 
 
 
 ''~~ 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 _.fe JI 
 
 0- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 > jS 
 
 .S ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 s 
 
 
 
 
 / r,'^ 
 
 ^3 S 
 \| 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 --^ 
 
 ---' 
 
 !3fc 
 
 
 
 
 
 
 
 
 
 
 V 
 
 
 
 
 
 
 
 
 
 -V 
 
 / 
 
 
 _-^ 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 ^ 
 
 i 
 
 
 . S 
 
 di. I 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 \l 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 • / 
 
 
 
 V 
 
 £ c ^ 
 
 
 
 
 
 
 
 
 
 
 r 
 
 
 
 
 
 
 
 /■ 
 
 / 
 
 
 
 3 
 
 B g 
 
 
 
 
 
 
 : 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 ^t 
 
 f5 60 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 /• 
 
 
 
 1^ 
 
 
 
 
 
 
 ; 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 \, 
 
 
 
 a 
 
 
 
 
 
 
 
 : 
 
 
 
 
 s. 
 
 
 
 
 
 
 
 '-. 
 
 \ 
 
 
 
 ^■§" 
 
 " 
 
 
 
 
 
 
 
 
 
 
 
 .«^ 
 
 
 
 
 
 
 
 \ ^ 
 
 ■^■^, 
 
 
 ^ 
 
 ** 
 
 
 
 
 
 ". 
 
 
 
 
 
 
 / 
 
 > 
 
 
 
 
 
 
 \ 
 
 \ 
 
 
 ^*i 
 
 -■ '^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 J 
 
 / 
 
 
 
 0) "r! ^ i 
 
 "• 
 
 
 
 
 
 
 
 
 
 z'" 
 
 
 
 
 
 
 
 
 
 ^ 
 
 / 
 
 
 .,3 
 
 -s s - § 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 _^ 
 
 ^•^ 
 
 
 
 / 
 
 
 
 ■" CU C> '' 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 " ^ 
 
 4J ^ 
 
 •- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 r^ 
 
 
 
 
 
 
 / 
 
 
 "^ 
 
 1) ^ — 5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 1 
 
 
 X 
 
 M 3 i 
 C M — > ^ 
 nJ C 4j - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 \ 
 
 
 ^^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 _- 
 
 — 
 
 
 
 
 
 
 
 /> 
 
 
 
 y 3 C ^j 
 
 uj Q ^ 5 
 
 
 
 
 
 
 
 
 
 
 
 t 
 
 
 
 
 
 
 
 
 /' 
 
 
 
 ri! 
 
 
 
 
 
 
 
 
 > 
 
 
 i 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 '^ 
 
 ■^ !=^ "^ 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 . 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 ■^ 
 
 V. > 1 
 
 
 
 
 
 
 
 
 
 _^- 
 
 " 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 1; 
 
 
 
 
 
 
 ; 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 '1 
 
 -n Q.^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 * 
 
 I) 10 
 
 N 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 " 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 -J 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 !^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 ).' 
 
 
 
 
 
 
 
 
 
 
 
 \l 
 
 
 
 r- 
 
 _ 4) (8 J 
 
 - -13 "S ^ 
 
 C C « 
 
 3 « — 5 
 
 ■M 
 
 
 
 
 
 
 
 /,' 
 
 
 
 
 
 
 
 
 
 
 *-• 
 
 -^ 
 
 
 
 § 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ■^,, 
 
 
 
 ^? 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 8 m " 2 
 
 ". 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 ^^ 
 
 --^ 
 
 
 
 
 
 s 
 
 .2 -c ■£ g 
 
 "■ 
 
 
 
 
 
 
 'V 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 1 
 
 "^ CL -t3 !: 
 w . C ^ 
 
 
 
 
 
 
 • 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 -t; 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 On" '^ 
 
 
 
 
 
 
 
 1 \ 
 
 
 
 
 
 
 
 I 
 
 
 
 
 
 
 
 
 .,? 
 
 
 ■^ 
 
 
 
 
 
 
 r 1 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 ^5 
 
 
 
 
 
 
 V 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 '^ 
 
 1 i ^ s 
 
 ^ 
 
 
 
 
 
 {: 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 "■ 
 
 "■ 
 
 
 
 
 
 !\ 
 
 
 
 
 
 
 
 y 
 
 
 
 
 
 
 
 
 
 !i 
 
 CL ^ I 
 
 ^ 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Is 
 
 1^ 
 
 
 
 
 1 
 
 /■ 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 "^ 
 
 ffl 3 ^ ! 
 
 ^ 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 i^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 ^^ 
 
 £l^ i 
 
 ^ 
 
 
 
 
 1 
 
 • 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 
 1 
 
 '' 
 
 
 
 
 \ 
 
 f 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 t ^ 
 
 
 
 
 '■^ 
 
 ^ 
 
 ■. 
 
 
 
 
 -- 
 
 — ' 
 
 
 
 
 
 
 
 1 
 
 
 
 ■ =. ■ 
 
 
 
 
 f 
 
 r 
 
 
 ■ 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 SI 
 — -fe 
 
 , 
 
 i^ 
 
 
 
 \ 
 
 \ 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 I 
 
 ) 
 
 
 .' 
 
 
 
 
 
 
 
 
 
 
 
 
 " -2 s 
 
 3 - 
 
 
 
 H 
 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 i^:iai 
 
 Showing 
 
 New Yc 
 
 
 
 
 
 \ 
 
 y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 I 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 =;"* 
 
 
 
 / / 
 
 ' 
 
 
 .. 
 
 
 
 
 
 
 
 
 
 
 
 
 »" 
 
 
 
 
 :n 
 
 \ 
 
 .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 ) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 JZ 
 
 
 
 
 y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 a 
 
 
 
 
 
 
 -^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 »■ 
 
 
 
 
 
 \ 
 
 V 
 
 
 
 
 
 
 
 
 
 
 
 
 o 
 
 , ^ 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 ls§l^r:i 
 
 
 :i 
 
 
 
 
 
 [ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 I 
 
 
 
 
 
 
 
 
 
 
 
 
 .-irf\'f<^r^4^' - f^ >^V»^>4*^«J 
 
 ■9 = fit;5S»t:S.|l 
 
 
 iAj n / 1^ J ocJ J. u n o D sr f a 
 
 
 '*H?S % % 'i- t y?; t ^ % %. 2£S£Sifi;2 f 
 
 
 KS?S S W r 2 .' "i r 3; Se3 sssasjsse? 
 
 
 w-sSs-«'=2r6''5"3''?»" 
 
 108 
 
RECORD OF INTERNATIONAL EXCHANGE QUOTATIONS 
 
 1910-1915 
 
 The following table shows the course of English, French and German exchange in New York, for sight 
 drafts during the past four years, as well as that of some other countries. New York funds are expressed 
 in 64ths. For instance, in January, 1910, the highest rate for New York funds was a 4-64 premium, and 
 the lowest a 3-64 discount. 
 
 Month 
 Yea 
 
 5 and 
 
 New York Funds 
 in Canada 
 
 (in 64ths) 
 
 Sterling 
 
 Francs 
 
 Marks 
 
 
 High 
 
 Low 
 
 High 
 
 Low 
 
 High 
 
 Low 
 
 High 
 
 Low 
 
 January- 
 
 1910 
 1913 
 1914 
 1915 
 
 4 P 
 
 6 P 
 
 6 P 
 
 64 P 
 
 3 D 
 
 Par 
 
 2 P 
 
 20 P 
 
 486.90 
 487.75 
 486.95 
 485.05 
 
 486.15 
 485.75 
 485.55 
 483.95 
 
 516J^ 
 
 518^ 
 516M 
 
 5181.^ 
 
 518M 
 521 Ji 
 
 519M 
 
 95A 
 95M 
 94 H 
 
 88M 
 
 95,^ 
 94 fi 
 94 U 
 86}^ 
 
 February 
 
 1910 
 1913 
 1914 
 1915 
 
 4 P 
 
 5 P 
 5 P 
 
 52 P 
 
 4 D 
 Par 
 Par 
 
 28 P 
 
 487.15 
 487 . 80 
 485.95 
 484.70 
 
 486.00 
 487.30 
 485.35 
 479.15 
 
 5163^ 
 5163^ 
 5181/g 
 518M 
 
 518^ 
 517J^ 
 5183^ 
 528 
 
 95A 
 95M 
 95,^ 
 
 87H 
 
 9411 
 9oH 
 9411 
 82 
 
 March 
 
 1910 
 1913 
 1914 
 1915 
 
 1 P 
 
 4 P 
 
 6 P 
 
 52 P 
 
 3 D 
 
 Par 
 
 3P 
 
 40 P 
 
 487 . 70 
 487.95 
 486.65 
 481.15 
 
 486 . 70 
 486 . 90 
 485.85 
 478.55 
 
 516J^ 
 517}^ 
 5173^ 
 o25K 
 
 517M 
 518M 
 518M 
 532M 
 
 95M 
 94^ 
 95}i 
 84 M 
 
 95 A 
 94>^ 
 95 1^ 
 
 81% 
 
 April 
 
 1910 
 1913 
 1914 
 1915 
 
 Par 
 
 3 P 
 
 4 P 
 44 P 
 
 4 D 
 
 5 D 
 4 D 
 
 36 P 
 
 487.95 
 487 . 20 
 487 . 65 
 479.80 
 
 487.60 
 486 . 35 
 486.30 
 478.90. 
 
 516?^ 
 5181^ 
 515?^ 
 5315-^ 
 
 517M 
 518M 
 517M 
 532M 
 
 95M 
 953^ 
 
 95M 
 83 M 
 
 95 A 
 95 i^ 
 953^ 
 81^ 
 
 May 
 
 1910 
 1913 
 1914 
 1915 
 
 Par 
 
 3 P 
 
 3 P 
 
 40 P 
 
 5 D 
 
 Par 
 
 3D 
 
 32 P 
 
 487.80 
 486 . 75 
 488.75 
 479.80 
 
 486.35 
 486.05 
 487.60 
 478.25 
 
 517J^ 
 
 617M 
 515J^ 
 531 J^ 
 
 518% 
 518?^ 
 5155^ 
 513 
 
 95>^ 
 95 ^ 
 95 A 
 83M 
 
 95 
 95 i",- 
 95% 
 
 823^ 
 
 June 
 
 1910 
 1913 
 1914 
 1915 
 
 Par 
 
 2 P 
 
 1 P 
 
 52 P 
 
 5D 
 
 3 D 
 
 2 D 
 
 40 P 
 
 487.05 
 486.90 
 489.00 
 
 478.45 
 
 485.85 
 486.50 
 487.65 
 475.85 
 
 518J^ 
 518^- 
 515 
 543 
 
 519^ 
 518?^ 
 516J^ 
 570 
 
 95J^ 
 95 A 
 
 953^ 
 82 H 
 
 95 
 953^ 
 
 80 >g 
 
 July 
 
 1910 
 1913 
 1914 
 1915 
 
 3 P 
 5 P 
 1 P 
 
 48 P 
 
 3 D 
 
 3 P 
 
 5 D 
 
 16 P 
 
 485.80 
 487.05 
 492.00 
 476.75 
 
 485.20 
 486.45 
 485 . .30 
 476.00 
 
 518M 
 5183^ 
 505 
 553 
 
 519^ 
 
 518M 
 516K 
 570 M 
 
 95>^ 
 95 1% 
 96 
 
 «2H 
 
 94% 
 953-^ 
 95^6 
 
 SlJ'i 
 
 August 
 
 1910 
 1913 
 1914 
 1915 
 
 2 P 
 
 5 P 
 
 4 P 
 
 20 P 
 
 5 D 
 
 5 D 
 
 80 D 
 
 2 P 
 
 486.75 
 486 . 65 
 507 . 50 
 476.25 
 
 485.25 
 485.80 
 506.00 
 455.00 
 
 518^ 
 518?^ 
 No quo 
 564 
 
 519?^ 
 5193^ 
 tations 
 602 
 
 95^ 
 953^ 
 No que 
 82^ 
 
 94 J.^ 
 95,^ 
 tations 
 80% 
 
 September 
 
 1910 
 1913 
 1914 
 1915 
 
 Par 
 
 1 P 
 
 20 D 
 
 22 P 
 
 5 D 
 5D 
 
 SOD 
 
 6 P 
 
 486.75 
 485.90 
 506.00 
 471.87 
 
 486.05 
 485.30 
 495.25 
 454.00 
 
 518M 
 519^ 
 506 
 576 
 
 5183^ 
 520 
 510 
 601 
 
 95 A 
 953^ 
 96M 
 80^ 
 
 95A 
 
 943^ 
 
 84% 
 
 October 
 
 1910 
 1913 
 
 1914 
 1915 
 
 Par 
 3 P 
 Par 
 8 P 
 
 5 D 
 
 5D 
 
 56 D 
 
 Par 
 
 486 . 65 
 486.10 
 497.50 
 472.37 
 
 486.10 
 484.95 
 489.40 
 461.62 
 
 518M 
 520 
 505 
 579 
 
 520 
 521 M 
 515 
 
 59S}4 
 
 95)^ 
 94 if 
 93H 
 81>^ 
 
 94 M 
 
 94^ 
 88% 
 84% 
 
 November 1910 
 1913 
 1914 
 1915 
 
 2 P 
 
 3 P 
 36 D 
 
 2 P 
 
 6 D 
 5 D 
 Par 
 4 D 
 
 486.05 
 485.50 
 490.65 
 471.37 
 
 485.45 
 484.85 
 486.85 
 463 . 50 
 
 519H 
 520^ 
 510 
 
 5821^ 
 
 520^ 
 521M 
 5153^ 
 579 
 
 95 
 94 ii 
 883^ 
 79^ 
 
 943^ 
 945^ 
 
 853^ 
 81% 
 
 December 
 
 1910 
 1913 
 1914 
 1915 
 
 1 P 
 
 3 P 
 
 56 P 
 
 5P 
 
 oD 
 3 D 
 6 P 
 5D 
 
 486.10 
 485.55 
 489.15 
 473.65 
 
 484.90 
 485.05 
 485.00 
 470.25 
 
 520 
 520^ 
 511M 
 5831^ 
 
 520^ 
 521 M 
 517 
 588 
 
 95^ 
 94% 
 92^ 
 
 7934 
 
 943^ 
 94=>^ 
 86,% 
 763^ 
 
 109 
 
no 
 
 Notes on Foreign Exchange. 
 
 RECORD OF INTERNATIONAL EXCHANGE QUOTATIONS (Continued) 
 
 
 
 (Netherlands) Guilders 
 
 (Italy) Lire 
 
 (Scandinavia) Kroner 
 
 Years 
 
 and 
 hs 
 
 
 
 
 Mont 
 
 High 
 
 Low 
 
 High Low 
 
 High 
 
 Low 
 
 July 
 August 
 September 
 October 
 
 19U 
 1914 
 1914 
 1914 
 
 40M 
 No que 
 No que 
 No que 
 
 40 A 
 tations 
 tations 
 tations 
 
 516>g 518}^ 
 No quotations 
 No quotations 
 No quotations 
 
 26.75 26.72 
 No quotations 
 No quotations 
 No quotations 
 
 November 
 December 
 January 
 February 
 
 1914 
 1914 
 1915 
 1915 
 
 40 J^ 
 40^ 
 40 jV 
 40 A 
 
 40>i 
 
 40M 
 
 40 
 
 SQVs 
 
 533 
 524 
 533H 
 542H 
 
 540 
 536 
 544 
 580 
 
 26.00 
 
 25H 
 25.00 
 
 25.00 
 25.00 
 
 24M 
 24^ 
 
 March 
 April 
 May 
 June 
 
 1915 
 1915 
 1915 
 1915 
 
 40 
 39^ 
 39 A 
 40 
 
 39 H 
 39 ^ 
 39^ 
 39 A 
 
 563 
 
 ■576H 
 575 
 591 
 
 595 
 589 
 592 
 616 
 
 25.30 
 25.90 
 26.30 
 26.55 
 
 24K 
 25.05 
 25.75 
 26.20 
 
 July 
 August 
 September 
 October 
 
 1915 
 1915 
 1915 
 1915 
 
 4oys 
 
 40 A 
 
 40}^ 
 41>^ 
 
 S9% 
 39 H 
 393^ 
 40>^ 
 
 C09 
 620 
 615 
 622 
 
 640 
 652 
 652 
 646 
 
 26.35 
 26.25 
 26.25 
 26.30 
 
 25.60 
 
 25.40 
 
 25.25 
 
 . 25.65 
 
 November 
 December 
 
 1915 
 1915 
 
 42 
 
 43}^ 
 
 41 Ji 
 
 417,^ 
 
 643 
 651 1^ 
 
 651 
 660 
 
 29.00 
 29.00 
 
 26.10 
 27.00 
 
 shipments of cotton, grain and other produce. This was not possible 
 at the outbreak of the war, but later on, when the crops were actually 
 harvested and shipping was reorganized, the enormous exports from 
 the United States speedily corrected the exchanges and reversed the 
 position so that sterling exchange reached par by the end of December 
 and fell steadilv until the low point of $4.50 was arrived at in August, 
 1915. 
 
 On August 13th, 1914, in order to assist the New York exchange 
 situation, the Bank of England signified its willingness to make pay- 
 ments in London on New York account against the deposit of an 
 equivalent amount in gold at Ottawa.* thus eliminating the dangers 
 and expense of an ocean shipment. This arrangement was equivalent 
 to opening a huge credit in London, limited only by the willingness 
 of the New York banks to part with gold. From' $100,000,000 to 
 $150,000,000 were sent to Ottawa and exchange was thus stabilized 
 until the fall shipments of produce produced their effect. 
 
 These corrective measures, aided by the constantly increasing 
 volume of American exports to Great Britain and her Allies, gradually 
 forced the rate down until it reached par in November, at which point 
 it remained up to the middle of December. Since then the exchange 
 has gone steadily in fax'our of New York, reaching in August, 1915, the 
 lowest point, $4.50 per pound, equivalent to a discount of 7%.** 
 
 *The deposits were accepted in Ottawa at the fixed price for gold bars of 77s. 6d. 
 per ounce standard, and for United States Eagles of 76s. GUI. per ounce, cquivalenJ 
 to a rate of $4.89 and $4.8932 respectively per pound sterling. 
 
 **The chart on page 108 giv^cs a graphic i^rescntation of the course of sterling 
 exchange on the New York Market. The quotations used are the buyers' rates 
 for sight drafts on the 8th, 15th, 22nd and the last day of each month, and are 
 therefore not necessarily the highest or lowest rates for the week. 
 
War and Exchange 111 
 
 During the first eight months of the year Great Britain made 
 large shipments of gold and securities from London, in addition to the 
 amount held in Ottawa for the account of the Bank of England, but 
 these remittances were not sufftcient to offset the unprecedented ex- 
 ports of munitions of war and food products to Great Britain and 
 her Allies, amounting to over $100,000,000 per month. 
 
 It was not until after- the low point was reached in August, 1915, 
 that the British Government appeared to realize the seriousness of the 
 exchange situation and took the obvious method of raising the rate 
 by arranging the Anglo-French loan of $500,000,000. This action, 
 however, had been delayed too long to be very effective, and though 
 it did arrest the downward trend, further assistance was necessary. 
 Additional shipments of gold and securities aided by loans arranged 
 between London and New York banks, gradually induced an up- 
 ward movement, which was later supported by the mobilization of 
 American securities in London by the Imperial Government for the 
 purpose of obtaining further credits from New York, if necessary. 
 Under these influences sterling exchange reached $4.78 in January, 
 1916, and during that month and February was maintained at about 
 $4.77. As the cost of shipping gold from London to New York 
 under war conditions is about 1.40% (7c. per sovereign) the above 
 rate is very close to the present gold importing point. 
 
 The exchange between New York and Paris calls for very little 
 additional comment. At the beginning of the war New York was 
 largely indebted to Paris for stock purchases and, as with London, 
 cable remittances between New York and Paris rose to unprecedented 
 heights, resulting in the complete breakdown of the exchanges. As 
 will be seen by the chart, French exchange has acted throughout in 
 sympathy with sterling, maintaining a slightly higher le\el until 
 February, after which, though still following the line of the sterling 
 curve, it reached much lower levels of depreciation, touching 14% 
 discount in August, or more than double that of sterling. 
 
 The close sympathy of the French and English exchanges is due 
 to the fact that Great Britain has in a great measure borne the finan- 
 cial responsibility of the American exports to France, the adjusting 
 payments being made between Paris and London. 
 
 German exchange from the commencement of the war has been a 
 very complex subject, and presents a study in economic, rather than 
 in exchange, especially so far as New York is concerned. 
 
 No mark quotations were available for the first six weeks of the 
 war or until about the middle of September, 1914, and from that 
 time the value of the mark fell steadily, the few temporary improve- 
 ments which occurred being immediately followed by still further 
 depreciation. 
 
 The lowest point, 11}/i<z. per 4 marks, was reached in January, 
 showing as compared with the par value of 953^^ per 4 marks, a dis- 
 count of nearly 24%. 
 
 As Germany and her Allies have been cut off' from direct trade 
 with the United States, it is plain that the great depreciation of the 
 
112 Notes on Foreign Exchange. 
 
 mark is not due to the reasons responsible for the fall in the \-alue of 
 the pound sterling and franc., viz.: abnormal imports of munitions and 
 produce. 
 
 As a matter of fact the German mark is uni\ersall\' at a discount, 
 but such is not the case with the franc or pound sterling. . In January, 
 191G, the mark was quoted in Amsterdam as low as 42 florins per 100 
 marks against a normal quotation of 59 florins, or nearly 29% discount 
 against Berlin. At the same time in Switzerland, 100 marks were worth 
 only 90 francs against the normal rate of 1233^^ francs, or a discount 
 of 27% against Berlin. The cause of this uni\ersal depreciation 
 ni the value of the mark cannot be found in exchange conditions, but 
 can only be ascribed to the decline in Germany's credit due to the lack 
 of confidence, even among neutral and friendly nations, as to her 
 future financial stability. 
 
 The serious reflection on German credit caused by the condition 
 of her exchanges has recently been recognized by the German Govern- 
 ment, which made an abortive effort to control the exchange markets 
 by centralizing business in the hands of the Reichsbank and certain 
 selected banking institutions. The effect of these special measures 
 has so far proved negligible and that any real benefit can accrue there- 
 from is unlikely. 
 
 Sir Edward Holden in a recent speech on British and German 
 financial conditions calls attention to the remarkable fact that both 
 Dutch florins and Danish and Swedish kroner command a premium 
 in America, notwithstanding the fact that the balances of trade between 
 the United States and these countries are heavily against the latter. 
 He says in part: 
 
 "This is a very important matter in connection with our blockade of 
 Germany, and this evidence, furnished by the exchange between Germany 
 and Holland and the Scandinavian countries on the one hand and between 
 Holland and Scandinavia and the United States on the other hand, will we 
 hope, be realized by the authorities, who seem to wish to minimize the quantity 
 of goods that Germany is receiving through neutral countries. Exchanges 
 are an infallible test of the balance of trade and when Dutch and Scandina\ian 
 currencies are at a premium in America in the face of the huge excess of 
 imports over exports, and with no gold shipments. It is evident that the 
 balance is being furnished by the sale of securities, which, owing to Germany's 
 indebtedness to Holland, Denmark and Sweden, have undoubtedly been 
 supplied by Germany." 
 
 Dutch exchange in New York has been at a premium of nearly 9%, 
 thus leading to shipments of gold from New York to Amsterdam. 
 On F(.?bruary 12th, 1916, it stood at 42.18^4, or a premium of 5^^'c on 
 the par of 40.3 per florin. 
 
War and Exchange 113 
 
 The following table gives the closing quotations on 20th December, 
 1915:— 
 
 Country Quotation Par Value Dis. % Premium % 
 
 England 4 . 73 dollars 4 . 86 3 
 
 *France 5.82 francs 5.18 11 
 
 Germanv 19.3 cents 23.8 19 
 
 Austria.' 13.40 cents 20.3 34 
 
 Russia 32. cents 51.5 38 
 
 *Italy 6.56 lire 5.18 21 
 
 *Switzerland . ... 5.26 francs 5.18 13^ 
 
 Spain.... 18.83 cents 19.3 2}4 
 
 Scandinavia.... 27.60 cents 26.8 3 
 
 Greece 19.35 cents 19.3 H 
 
 Holland 44 . 3 cents 40 . 3 7}4 
 
 Much prominence has been given in the financial press of late to 
 the appreciation of the American dollar as compared with other 
 exchanges, particularly with those of belligerent nations, but little 
 or no comment has been made regarding the depreciation of the dollar 
 itself in Scandinavia, Holland and other neutral nations. As a matter 
 of fact the dollar at one time reached a heavier discount in Holland 
 than that yet attained at any time by the pound sterling. On Febru- 
 ary, 12th, 1915, gulden in New York were at a premium of 5%. In 
 other words, the dollar was at a discount of 5% as against a discount 
 of only 2% on the pound sterling on the same date. 
 
 The discount on foreign money or premium on the dollar means 
 that exchange on New York is difificult to get as there is not enough 
 to supply the needs of the foreign centres and consequently the cost 
 of American goods to the foreign purchaser is correspondingly increased. 
 Normally the situation encourages exportation from the country in 
 question to the United States and discourages importation from the 
 United States and this is the natural corrective for adverse balances. 
 Under war conditions, however, Great Britain's ability to export is 
 greatly reduced, but her need to import is vastly increased. Continued 
 settlements by gold shipments from Great Britain are impracticable, 
 and from the United States' point of view, undesirable. Under these 
 conditions the United States therefore, had either to extend credit 
 or stop exporting. The Anglo-French loan was the answer, and 
 doubtless additional loans will be found necessary from time to time 
 for the same purpose. 
 
 As New York is the exchange centre of this Continent, foreign 
 exchange conditions in Canada since the beginning of the war have been 
 a reflection of those experienced in the United States, the quotations 
 for sterling, francs, etc., dift'ering from those in New York only by 
 the discount or premium obtaining on New York funds in Canada, 
 and a brief reference to the latter is therefore alone' necessary. 
 
 Under normal conditions, gold can be transferred between New 
 York and Montreal for about 70c. per $1,000, or 5/64 of 1% on either 
 
 *See explanation, page 48. 
 
114 Notes on Foreign Exchange. 
 
 side of par, but since the war, gold shipments have seldom been made, 
 and the quotations, without this steadying influence, have ranged 
 from 13^^% discount to 1% premium. 
 
 It will be noted that the chart gives the course of New York funds 
 in Canada and in order to compare with the other exchanges, the curve 
 should be reversed, discounts becoming premiums and vice versa. 
 This can be done mentally when it will appear that Canadian funds 
 in New York have risen or fallen in sympathy with the sterling and 
 other exchanges, within the limits, however, of about 1% on either 
 side of par. Canadian funds in New York were therefore at a premium 
 during the first few months of the war, but, in sympathy with sterling, 
 fell to par in November and to a discount in December, and remained 
 at a discount until August, 1915, when the proceeds of the United 
 States loan to Canada of $45,000,000 became available. In conjunc- 
 tion with a number of loans made by New York to Canadian Munici- 
 palities and others, this loan was sufficient to maintain the rate at 
 about par for the remainder of the year. Since then, however, Cana- 
 dian funds have been more or less at a discount in New York, or 
 conversely, New York funds have been at a premium in Canada. 
 The course of exchange between the United States and Canada and 
 the financial relations obtaining between the two countries have been 
 so fully dealt with in the press, that it is unnecessary to enlarge further 
 upon the situation. The view point of an onlooker, however, is always 
 interesting and we quote the following from an article on Canadian 
 Exchange, which appeared in a recent issue of the Scottish Bankers' 
 Magazine*: 
 
 "It is well known that certain of the exchange tend to fluctuate in 
 groups. Thus France and Belgium seldom varied greatly, while Ger- 
 many and Holland showed a decided tendency to follow each other 
 in every important rise or fall. Since the war, economic conditions 
 are so altered that these groups have been completely broken up, 
 and new groups have to some extent been formed. Thus, it is found 
 that the Paris rate and the Petrograd rate have closely followed each 
 other through most unprecedented variations, and the reasons for this 
 are to some extent easily imagined, for the common circumstances 
 and needs of the countries are obvious, and the exceptional conditions 
 which have influenced the one rate have no less applied to the other. 
 Now it will be found that the Canadian rate and the New York rate 
 seldom show much difterence. Part of the reason for this is found in 
 the similar nature of a large portion of their exports, but the most 
 important cause lies in the comparati\'e proximit\' of the two countries. 
 The two countries can exchange so easily that any \iolent fluctuation 
 in either would quickly be utilized by speculativ'e buyers with the result 
 that a common level is maintained. New York being the more 
 important centre, in order to understand ("anadian fluctuations it 
 will therefore be necessary to stud>' the New York rate di'u-ing the time 
 of the war, knowing that the Canadian rate has been obliged to follow 
 it closely in e\ery fluctuation. 
 
 *"The Canadian Exchanges," George Thomson. 
 
\\\\K AND ExcnAN(!E 115 
 
 "In times of peace there are influences which affect the Exchanges 
 to a considerable extent, but which are now almost negligible, while 
 others have assumed a predominant position. Thus freights and the 
 payment of interest on loans are important factors in ordinary times, 
 but in the exceptional times in which we are living these are com- 
 pletely dwarfed by the more urgent factors. Exports and imports, 
 the sale of securities, and the issuing of new loans, are the influences 
 of which the working is most evident at present. 
 
 "We find that prior to the time of the declaration of war, there had 
 been a steady sale by Continental holders of securities on the New 
 York and London Stock Exchanges. This, following on a condition 
 of large indebtedness by America to this country, sent the quotation 
 up to from 5.00 to 5.50 or 3s 8d per dollar, a most serious position 
 for the American merchants who had to remit to this country. For 
 some time this high rate was maintained, with a slight tendency to 
 fall, and the urgency of the situation led this country to try to devise 
 some remedy. In normal times, of course, the remedy would be found 
 in the remittance of gold, but the risks of such a proceeding in war 
 time were prohibitive. It was, therefore, proposed that gold should 
 be sent from New York to Ottawa to be held on account of this country. 
 This was not readily agreed to by the United States, who were having 
 minor financial difficulties within their own country, but eventually 
 some gold was sent as proposed. By this time, however, the steady 
 demand for munitions and arms from the United States had begun 
 to make itself felt in the scale of credit, and soon the rate had fallen 
 to about par. In the course of some weeks it fell far below par, and 
 the fall continued steadily till last August, when it had descended 
 far beyond all normal limits. During August a further sharp fall 
 occurred, the rate reaching about 4.50, followed by a recovery to, about 
 4.75 almost immediately. 
 
 "The situation had now caused grave anxiety once again, for the 
 situation of merchants here who required to remit to America was as 
 unfavourable as the position of the American merchants had been at 
 the beginning of the war. As a remedy for this situation the loan by 
 America to this country was promoted. The situation, however, still 
 bristles with difficulties, and no one can be sure what the immediate 
 future may show. Part of the difficulty arises from the fact that there 
 are probably large sums lying here on American account, waiting an 
 improved rate. If the rate be stimulated so as to show more favour- 
 ably for this country, these funds may be immediately remitted, caus- 
 ing a large demand for drafts, and so reducing the rate once more to a 
 low level. Then it may be noted that the low rate is extremely 
 favourable for the selling of American securities, an influence which 
 tends to make the rate rise once more. Underlying all these considera- 
 tions, however, there lies the fundamental fact that it is to the imports 
 and exports that we must look for the real key to the problem. So 
 long as we continue to buy largely from abroad at a time when our own 
 exports are much reduced, we cannot long avoid seriously adverse 
 exchanges. When the Government emphasized the need for economy, 
 it was probably impossible to make the man in the street understand 
 
IIG Notes on Foreign Exchange. 
 
 the situation, but there were many intelligent men who did not grasp 
 the significance of the appeal. It would have prevented some idle 
 and purposeless talk if it had been more clearly understood by the 
 average business man, that the state of the Exchanges is most critical 
 when they fall so low, and that only an extensive and considerable 
 reduction of our imports can permanently remedy the situation. A 
 clear grasp of the problem as affecting the Foreign Exchanges would 
 therefore direct the general public towards the wise and effectual 
 economy which will most quickly restore the balance of credit." 
 
 The whole subject of foreign exchange since the beginning of the 
 war is most complex and in this brief review we have only referred to 
 the more outstanding and evident effects without attempting to explain 
 the causes. To do so would require an exhaustive study of the internal 
 conditions of each country, largely a matter of conjecture at the 
 present time. It is hoped, however, that sufficient has been said in 
 this and the preceding chapter to make the accompan3-ing table and 
 chart intelligible and assist the reader to realize the existence of the 
 many mysterious and undisclosed influences proceeding from the econ- 
 omic pressure exerted by the war upon the financial centres of the world. 
 
APPENDIX A 
 
 PRACTICAL DATA 
 
 Constants. — -A constant is a quantity of fixed value in a calcula- 
 tion, expressed numerically in as simple a form as possible, the value 
 which remains invariable throughout the calculation. 
 
 Foreign exchange offers a wide field for the use of constants, and 
 the opportunities for their application are endless. For instance ^f 
 is a constant which, multiplied by any number of dollars, will give 
 the equivalent in pounds sterling at par (4.86%) and conversely -Jf 
 multiplied by any number of pounds sterling will give the value of 
 the same in dollars. 
 
 The constant for finding the interest for .use in calculating the rate, 
 on French bills of exchange is ,}(j\: this, multiplied by the rate and 
 time in days, will give the amount of interest to be added to the rate. 
 This constant is arrived at as follows: — 
 
 Interest being reckoned on the basis of 520 fcs to -$100, the con- 
 stant or invariable factor will be the interest on 520 fcs for 1 day at 
 
 Interest on Bills of Exchange. — Interest on Bills of Exchange 
 is always figured on the rate and not on the amount involved in the 
 transaction. The following constants will be found useful where no 
 tables are available. 
 
 English Exchange. — Interest for the sterling rate is figured on the 
 basis of $485 per £100, 365 days to the year and 3 days of grace. 
 
 If the interest had been reckoned on a basis of 486^^, the con- 
 stant ^V multiplied by the rate and the time in days, would give the 
 interest to be deducted from the demand rate. As it is, this constant 
 can be considered sufficiently close for practical use, as the error only 
 represents an excess of about 1/300 {^s of 1% of 2.52) or 8}^ cents per 
 £1,000. 
 
 Example: — 
 
 £1,000 for 63 days at 3% at $486^ = 2.52 
 
 485 =2.5114 
 
 a difference of .0086 in favour of the pur- 
 
 chaser. 
 
 French Exchange. — French interest is based on 520 fcs to the 
 $100, 360 days to the year and no days of grace. 
 
 The constant ^W multiplied by the rate and the time in days, 
 will give the amount of interest to be added to the demand rate. 
 
 German Exchange. — German interest is figured on the basis of $95 
 to mks 400, 360 days to the year, and no days of grace. 
 
 The constant 7?2oo multiplied by the rate and the number of days 
 will give the interest to be deducted from the rate. 
 
118 • Notes on Foreign Exchange. 
 
 If the basis had been made $96 to the mks 400, the constant 
 would have been much more simple, gi^. The latter, however, is 
 sufficiently close for calculations where no table is a\ailable. 
 
 Example: — 
 
 120 days at 4% on $96 basis = 1.28 
 120 " " 95 " =1.2666 
 
 the difference of .013 (or about 1%) is equivalent to 14 cents on 
 $1,000 in favour of the purchaser. 
 
 Dutch Exchange. — This exchange interest is figured on the basis 
 of $40 to Florins 100, 360 days to the year and no days of grace. 
 
 The constant g J^, multiplied by the rate and the time in days, 
 will give the amount of interest to be deducted from the rate. 
 
 Chain Rule. — A method of calculation frequently used in ex- 
 change, especially in indirect or arbitrated exchange. It consists of 
 arranging the terms of the exchanges in the various currencies under 
 consideration in such a manner that the required equivalent is quickly 
 obtained : — 
 
 How many $x = b How manv dollars (x) =£1 
 
 if b = c if £1 =203^ Marks 
 
 and c = $ and 400 Marks =95 dollars 
 
 1X20^X96 1947.5 ^. ^aT/ 
 ""= 1X400 =^QQ- = $4.86J/^. 
 
 It will be noted that these equations follow a regular order, the 
 left hand side of the first equation ($x) is always identical in denomina- 
 tion with the right hand side of the last equation ($) and that the 
 right hand side of each equation is identical with the left hand side 
 of the equation below it. The denominations thus follow each other 
 like the links of a chain, hence the name "Chain Rule." 
 
 Multiplication. — The equivalent, in improper fractions, of the 
 numbers below should be noted, as they will be found most useful, 
 in exchange calculations, for multiplication and division. 
 
 62K=i^r 6i^=-Yr.<'- 
 
 83M=^?F 8M = -\V- 
 
 125 =i-V- 123^ = i|ii 1M = V- 
 
 166%=J-Y^ 16%=ir' 1^=V- 
 
 250 =-i-Of<^ 25 =1-^^ 23^=Y- 
 
 10 
 
 QOql/_ioOO QQ1Z_100 QIZ 
 
 Example: — 
 
 Multiply 647 by 125 = 647x^^^-^ = 80875, or in other words add 
 three ciphers and divide by eight. 
 
 To divide reverse this rule, ^ifl'^ = — f^-^^-^ = 647, or in other 
 words move the decimal point three places to the left and multiply by 
 eight. 
 
Practical Data 119 
 
 Multiply 66x333 3^ = 66xi-V- =22,000 
 
 Mille. — A premium of l°/oo means 1 on every thousand equivalent 
 
 to 1/10 of r^. 
 
 On the continent of Europe the expression per mille is much 
 used, and great care should be taken not to confuse the sign °/oo (per 
 mille) with °l^ (per cent.)- l°/oo on the continent, therefore, is used 
 instead of 1/10 of 1°!^, Y^"]^^ for 1/20 of l°/„ and ^^/^^ for 1/40 of 
 1°;' and so on. 
 
 Troy Weight. — -Troy weight is used in Great Britain, Canada 
 and the United States, in all transactions pertaining to gold and silver 
 coin and bullion. 
 
 24 grains =1 pennyweight (dwt) 
 
 20 dwt = 1 ounce 
 
 12 oz. =1 pound troy. 
 
 A pound avoirdupois contains 7,000 grains, and a pound troy 
 contains 5,760 grains. Troy weight is used by the British and United 
 States Mints in weighing gold and silver, while the metric or decimal 
 system is used by other nations. 
 
 1 grain = . 06578895 grammes 
 
 24grains =1 pennyweight (dwt) = 1.55517481 " 
 20 dwt =1 ounce (oz.) =31.103496 
 
 12 oz. =1 pound troy =373.24195 
 
 A gramme, the unit of weight in the metric system, equals 
 15.43234874 grains troy. 
 
APPENDIX B 
 
 THE OLD PAR OF EXCHANGE 
 
 The former method of qu9ting sterling exchange on the basis 
 of a percentage on the old par of exchange (§4.441 to the £) is gradually 
 being abandoned. A short account of the history of the "old par of 
 exchange" is interesting. 
 
 Briefly stated the English occupation of Canada in 1760 caused 
 the withdrawal of the almost worthless "Ordonnances" and card 
 money of the French reginie, and the country found itself depending 
 entirely on the gold and silver coins of other countries for its circulating 
 medium. The English government found it necessary to import large 
 cjuantities of Spanish milled dollars for the payment of the army, 
 public supplies and works which they paid out at the rate of 4s. Gd. 
 per dollar or $4.44| per pound sterling. In doing this, they simply 
 adopted the par value of the pound sterling established by an Act 
 of 1704 dealing with the currency question of the American colonies. 
 This rate of $4.44y is what is called the "old par of exchange" and the 
 present quotations are given in the form of a percentage of adx^ance 
 on the old par. 
 
 In 1792 the Act establishing the United States Mint was passed, 
 and we now find the legal weight of the silver dollar given as 371.25 
 grains of pure silver, while the weight of the English shilling remained 
 unchanged. 
 
 The sterling equivalent of this new dollar was 
 
 371.25x20 , „^„^ , .... 
 3^3^^-^=4.3201 shdhngs 
 
 and the value of the sovereign in terms of that dollar 
 
 1718.709 
 
 371.25 
 
 = $4.6295. 
 
 In 1837, the United States altered the ratio between gold and silver 
 from 15.1:1 to 15.988:1. This undervaluation of siher practically 
 made gold the standard of value and, from this time on, we have to 
 deal with the relative value of the pure gold contained in the sovereign 
 and in the gold dollar respectiv^cly. The gold dollar contains 23.22 
 grains of pure gold and the sovereign 113.001605. S4. 86656 is now 
 the "mint par" between North America and Great Britain, or an 
 adv^ance of 9.497679 or approximately 93^ per cent, on the old legal 
 par of exchange of 4.444^. 
 
 By an Act of Parliament, $4.86^^ per pound sterling, or 9^ per 
 cent, premium on the old par was made the legal par of exchange for 
 Canada. The United States continued to quote sterling b>' premium 
 on the old par of exchange until 1873, when it was discontinued. 
 Owing to the light weight of the sovereign at that time (112.149 grains) 
 the actual premium stood at about 9 per cent. 
 
The Old Par of Exchange 121 
 
 The advance is reckoned as so much per cent, on $4.444|, the 
 old value of the pound. Therefore 8% premium on 4.44| amounts 
 to .3555, which, added to 4.444, gives the equivalent of $4.80 per 
 pound. 
 
 Find the value of a draft for £100 at 9}/8% premium. 
 
 Old par of exchange S4 . 4444 
 
 To which add 93/g% of itself 4055 
 
 S4.8500 
 or S485 for a £100 draft. 
 
 What is the premium when £1= $4.8666 
 
 Deduct old par of exchange ($4|) 4.4444 
 
 Advance over old par 4222 
 
 4.444: 100:: .4222: 93^% or in.'TT|^ = 93^% premium on old par 
 This method may be simplified into the following rules: — - 
 
 (1) To convert from a premium quotation to currency. — Move 
 the decimal point one place to the left and divide by 2^ (or multiply 
 byW)- The currency equivalent of 109^^8 by this rule would work 
 out as follows: — 
 
 109>-^^2M=-Vt,^-x|=4.85 
 
 (2) To convert from a currency to a premium quotation. — Move 
 the decimal point one place to the right and multiply by 23^ (or 
 multiply by ^^^-). 
 
 Thus: — -48.6f x234=1093^ or 93^2 per cent, premium on the old 
 par.* 
 
 (3) Convert $4.8645 into an old par quotation. 
 
 4.8645 x23^ 
 
 4.8645 
 
 1.216125 
 
 10.945125 = 109.451 or 9iV+t5t 
 
 These quotations advance by sixteenths and sometimes by 
 sixty-fourths, thus: — 9i'V, ^1-^+-^^, 9iV+^\, and so on. 
 
 A quick way to convert the decimal into a vulgar fraction to the 
 nearest sixty-fourth is to learn the eighths by heart, the knowledge is 
 always useful. 
 
 )^=.125 3^ = .50 J^ = .875 
 
 34 = .25 5^ = .625 
 
 ^ = .375 M = -75 
 
 *These two rules are based on the fact that at the old par of exchange one 
 dollar was worth nine English six-penccs, of which there are forty in the pound: 
 therefore — 
 
 £1 
 
 4_0 nr 1 
 9~ *-'^ 2.25 
 
 =Aor^F 
 
122 Notes on Fokeiun Exchange. 
 
 Deduct the nearest eighth from the decimal and divide the 
 remainder by sixteen. This will give the number of sixty-fourths 
 to be added to the deduction. In the above example .375 or ^ 
 deducted from .451 lea\es .076. Sixteen will go into 76 nearly five 
 times, so we ha\e l()!*-^s + o4 = 109,v, , or if a close (juotation is desired, 
 109,V+bV. 
 
 It is always to be borne in mind that all the fractions of the 
 Canadian quotations are a fractional percentage o?i the old par of 
 exchange and not on the present \alue of the pound sterling, the latter 
 being about ten per cent. more. The difference between 109 and 
 1093^ is 55.55 cents per £100, while one-eighth of one per cent, on 
 S485 is 60.62 cents: a difference of 5.1 cents per £100. An ad\-ance of 
 a si.xty-fourth in the Canadian quotation makes a difference of §6.944 
 per £10,000 or approximately $7.00. From this fact a short and 
 useful con\-ersion rule can be made. 
 
 Ride. — Neglect 4.80 as common to all quotations and equivalent 
 to 108%. Divide the remaining three figures in the quotation by 
 7; neglect the remainder, if an\-, and add one to the result. This 
 will give the number of sixty-fourths over 8%. 
 
 Thus, to convert 4.8715, divide 715 by seven and add one. This 
 gives 103 (102-1-1) as the number of sixty-fourths to be added to 
 108% or l|^ = li\+T.\, which, added to 108, gives the equivalent for 
 the rate $4.8715 as 109,9,.+^,\. 
 
 This rule is accurate to the nearest sixty-fourth up to and in- 
 cluding 4.8875 = 9} r^-|-:jV. After that it will be found necessary to 
 increase the remedy for degree of error to two sixty-fourths. This 
 rule will, of course, work conversely, from Canadian to currency 
 (}uotations, by multiplying the number of sixty-fourths in excess of 8% 
 premium by 7, and, for remedy of error, deducting 1 per cent, from the 
 results. 
 
 To find the equivalent of 9i"\-l-i^'f by this rule: 
 9A-friV = 8-FH. and 77x7 = 539, 
 1 per cent of which, namely 5, being deducted leaves 534, and the 
 equivalent rate is 4.8534. 
 
 The equivalent of 1/64% to 1% on the old par are as follows: 
 
 i;iO,OOOat 8% =48,000 8-^1/4=48,111.111 
 
 8 -M/64 =48,006.944 8 -|- 3/8 =48,166.666 
 
 8-1-1/32=48,013.888 8-f 1/2 =48,222.222 
 
 8 4-3/64=48,020.833 8-1-5/8=48,277.777 
 
 8-f-l/16 =48,027.777 8-1-3/4 =48,333.333 
 
 8 + 1/8 =48,055.555 8 -|- 7/8 =48,388.888 
 
 9 =48,444.444 
 
 Any equivalent can be calculated from the above data. 
 
 9 -7/16=4.844444 +.010666-^.002777 =4.86388 
 
APPENDIX C 
 
 TEST QUESTIONS 
 
 (Set by Qyeen's University, Kington, for Fellow's Course, C.B.A.) 
 
 1. (a) A New York banker is asked to buy from an exporter a 
 sixty-day bill on London for £1,420. London discount rate is 2% 
 per cent. Demand bills are quoted in New York at 4.8620. Figuring 
 interest on the basis £100 = $485, and allowing for stamps, and the 
 New York banker's commission of a 3<4 of 1%, work out the proceeds 
 which the exporter will receive. 
 
 (b) If New York funds are at 3/64 premium in Montreal, give 
 the Montreal equivalent of the rate paid. 
 
 2. Demand sterling in New York is quoted at 4.8620. New 
 York funds in Montreal are at 1/16 premium. Calculate the Canadian 
 rates respectively for demand, three days' sight, and sixty-day bills, 
 quoting them in terms of a premium on the "old par," 4.44|. In 
 case of sixty-day rate allow for stamps and interest on the basis of 
 £100 = $485, but do not allow for commission. London discount rate 
 is 4:}/^ per cent. 
 
 3. A banker in Montreal opens an account with a London bank, 
 his initial transaction being the purchase of a demand bill on London, 
 £10,000 at 4.8520, which bill he forwards to the London bank for 
 credit of his account, and subsequently passes through the account 
 the following items: — 
 
 Debits to London Correspondent (representing demand exchange 
 bought by Montreal banker) :^£210 bought at 4.85; £460 bought at 
 4.8450; and £1,050 bought at 4.8420. 
 
 Credits to London Correspondent (representing demand exchange 
 sold by Montreal banker) :— £150 sold at 4.8650; £800 sold at 4.8620; 
 £720 sold at 4.86. It being understood that the Montreal banker keeps 
 his books in the form described on page 522 (second paragraph) of 
 "Banking Practice and Foreign Exchange," show his actual profit on 
 conclusion of the above transactions, on a date on which demand 
 sterling is worth 4.8550 — no allowance to be made for interest, stamps 
 or commission. Show exactly how you arrive at this actual profit. 
 
 4. A bank in Montreal sells locally its demand bill on London for 
 £5,000 at premium of 8^+1/32 and transfers the exact proceeds to 
 New York through purchasing New York funds in Montreal at 1/16 
 discount. What will be the amount of New York funds received by 
 the bank? 
 
 5. A Canadian bank receives for collection a bill of exchange for 
 $1,600 flat (not drawn with exchange) drawn by a merchant in Ham- 
 burg, Germany, on a Canadian importer, the instructions being to 
 remit to Berlin, Germany. The bank in Canada charges 3^% for 
 
124 Notes on Foreign Exchange 
 
 collecting the bill. New York funds are quoted at 1/32 premium on 
 the date on which bill is paid. Rate of exchange on Germany in New 
 York is 953^, meaning that 4 marks can be purchased for 95 V4 cents. 
 At rates quoted above, what amount in marks will the Hamburg 
 merchant receive? 
 
 6. The cheque rate in New York on Paris is 5.16J^+3/64. The 
 discount rate in Paris is 3%. 
 
 (a) What rate should be paid in New York for a fiO-day bill to 
 give M of 1% profit? 
 
 (b) What rate would be paid in Montreal, New York funds 
 being at a discount of 1/32? 
 
 (c) If the Bill of Exchange was for 23,240 francs, how much would 
 it realize? 
 
 7. A demand cheque on Berlin is quoted at 953^+1/32; discount 
 rate 3J^ per cent. 
 
 (a) What rate should be paid for a 90-day bill to give 3^g of 1% 
 profit? 
 
 (b) What rate would be paid in Montreal, New York funds 
 being at a premium of 3 64? 
 
 (c) If the Bill of Exchange was for 42,600 marks, what amount 
 would be realized? 
 
 8. (a) 40 pounds troy of standard gold (11, 12ths fine) is coined 
 into 1.869 sovereigns. 
 
 Find the value in £ sterling of an ounce of standard gold and 
 an ounce of pure gold. 
 
 (b) 43 ounces of mint gold (9/lOths fine) are coined into $800. 
 
 Find the value in dollars of an ounce of mint gold and an ounce 
 of pure gold. 
 
 (c) From the above data find the following values: — 
 
 1. A pound sterling in dollars. 
 
 2. A standard ounce of gold in dollars. 
 
 3. A mint ounce of gold in pounds sterling. 
 
 4. The weight in grains of the dollar and the pound sterling. 
 
 9. 1,000 grammes of pure gold can be minted into: — 
 
 Pounds sterling, 136.5675. 
 North American S, 664.6144. 
 Japanese yens, 1333.33^^3. 
 Scandinavian crowns, 2480. 
 German marks, 2790. 
 Austrian crowns, 3280. 
 Francs, 3444.444|. 
 
 From the above find: — 
 
Model Solutions 125 
 
 1. How many grammes of pure gold are contained in the franc 
 and the mark. 
 
 2. The value of the last three in Canadian money. 
 
 10. A merchant makes a requisition for the following drafts and 
 is quoted as follows: — 
 
 £1,000 at 4.8675. 
 
 2,000 francs 5.181^-1/32. 
 
 4,000 marks 96^+1/64. 
 
 2,000 fiorins at 40+1/64. 
 
 400 francs at .193. 
 
 $500 local currency on Hong Kong at 48.85. 
 
 (a) Find the amount in dollars that he has to pay. 
 
 (b) How much of each of the above foreign currencies could he 
 obtain for $1,000, at the rates mentioned? 
 
 Model Solutions 
 
 The concise solutions given below will enable students to check 
 up their work or will suggest alternati\-e methods. In actual practice 
 these problems would nearly all be solved with the assistance of ex- 
 change tables, involving little work. A knowledge of the process 
 by which the results are reached is essential, however, if the bank 
 officer desires to have more than a mechanical facility, and wishes to 
 be ready to meet new conditions requiring independent reasoning. 
 
 Note. — For convenience, and to avoid ciphers, the calculations 
 in questions 1, 2, 6 and 7 are based on the equivalents of £100, of 
 $100 (for francs) and of 400 marks. 
 
 Question 1. 
 
 (a) Demand rate £100 = 486 . 20 
 
 Deduct 63 days' interest at 2 J^ 2.41 
 
 Deduct stamp .24 
 
 Deduct commission 3^% '. 1.22 
 
 482.33 
 
 Value of 60 day bill 4.8230 
 
 (the nearest commercial quotation to 4.8233; if selling, the nearest quota- 
 tion would be 4.8235). 
 £1,420 at 4.8230 =$6,848.66. 
 
 (b) Value of 60 day bill in New York =482.33+3/64 of itself, (23 cents) =482.56. 
 Montreal equivalent =4.8255 
 
 (nearest commercial quotation to 4.8256). 
 
 Question 2. 
 
 Demand rate 
 
 New York demand rate £100 = 486 . 20 
 
 Add 1/16 of itself .31 
 
 486.51 
 
126 . Notes on Foreign Exchange. 
 
 Rate in currency 4.8651, 
 
 Move decimal one place to right and multiply by 2\i 
 
 48.651X2^ = 109.46475 
 Deduct nearest eighth, (3^) .375 
 
 .090 -^ 16 =6 or 6/64. 
 Canadian demand rate 1093-| +6/64 = Premium of 9 7/16 + 1/32. 
 
 Three Days' sight rate 
 
 New York demand rate + 1/16% of itself gives £100=486.51 
 
 Deduct six days' interest at 4:}4 .33 
 
 486.18 
 
 48.618X2M = 109.3905 
 
 Deduct nearest eighth, {%) 375 
 
 .016 
 Canadian three days' sight rate 109^ + 1/64 = Premium of 9^ + 1/64. 
 
 Sixty-day rate 
 
 New York demand rate + 1/16% of itself = £100=486.51 
 
 Deduct 63 days' interest at 43^^% 3.46 
 
 Deduct stamps .24 
 
 Canadian 60 day rate £100 = 482 . 81 
 
 48.281 X2M = 108.63225 
 
 Deduct nearest eighth, (5^) 625 
 
 Canadian 60 day rate 108% =85^ premium. 
 
 Ouestion 3. 
 
 Purchases 
 
 £10,000 at 4.8520 =$48,520 
 210 at 4.85 = 1,018.50 
 460 at 4.8450= 2,228.70 
 1,050 at 4.8420= 5,084.10 
 
 .007 
 
 £11,720 $56,851. 30 =total amount paid. 
 
 Amount debited to London 
 
 £11,720 at 4.86%= $57,037.33 
 Difference — credited to 
 
 Foreign Exchange Acct. 186.03 
 
 Sales 
 
 £150 at 4.8650=$ 729.75 
 800 at 4.8620= 3,889.60 
 720 at 4.86 = 3,499.20 
 
 £1,670 $8,118.55 =total amount received. 
 
 Amount credited to London 
 
 £1,670 at 4.86%=$8,127.33 
 Difference — debited to 
 
 Foreign Exchange Acct. 8.78 
 
 Balance at debit of London 
 
 Purchase, £11 ,720— Sales, £1,670 = £10,050 at 4.862.^ = $48,910 
 
 Balance £10,050 is worth (at 4.8550) 48,792.75 
 
 Difference (representing an offset to credit balance in Foreign 
 
 Exchange Acct.) = $ 117.25 
 
Model Solutions 127 
 
 Summar'}^ 
 
 Credits to Foreign Exchange Acct $186.03 
 
 Debits to Foreign Exchange i\cct 8 . 78 
 
 Balance at credit 177 . 25 
 
 Less offset (as above) 1 17 . 25 
 
 Question 4. 
 
 1.8% premium is represented by. 
 
 8^ premium is represented by. 
 
 $ 60.00 = Net profits. 
 
 8^ + 1/32 premium is represented by 
 
 1728 
 360 
 
 1738 
 360 
 
 1738J^ 
 360 
 
 £5,000 X 1738i -^360 =$24,145 . 83. 
 New York Funds being at 1/16 discount. 
 $99 15/16 Montreal funds purchases $100 New York funds 
 $1 Montreal funds purchases 100^99 15/16 
 
 $24,145.83 Montreal funds purchases .^ X24,145.83 =$24,160.92. 
 
 2. Or by method in footnote 2, p. 617, " Banking Practice." 
 
 1/16 on £10,000=$ 31.00 
 1/16 on 5,000= 15.50 
 
 $24,145 . 83 +$15 . 50 =$24,161 . 33 
 
 3. $24,145.83 +$15. 09 (1/16 of 1% of itself) =$24,160.92. 
 
 Ouestion 5. 
 
 Amount collected $1,600; less J^% commission =$1,598 
 
 Rate of exchange on Germany in New York, 4 marks = 95 J^ cents 
 
 Premium of 1/32 on New York funds in Montreal is equivalent to making the 
 
 German exchange rate 95^ + 1/32 
 
 95^ + 1/32 ofl% ^ 95. 25 + .029765 ^ 95.279665 
 4 ~ 4 4 
 
 = 23.81994 cents per mark. 
 
 1598^.2381994 = 6708.66 marks. Answer. 
 
 or 
 
 .9525 
 
 —^- = .238125 + 1/32 of 1% or .0000744 = .2381994 
 
 1598 -^. 2381994 =6708.66 marks. 
 
 Question 6. 
 
 (a) 516%= 516.875 
 
 Less 3/64: oil% 243 
 
 516.632 
 
 Add 
 
 60 days int. at 3% 2.60 
 
 Stamps 1/20 of 1% 26 
 
 Profits li of 1% 1.291 4.151 
 
 520.783 
 or 520.625+.157 or 5205^ + (2/64 of 1% of franc value) =520% -1/32. 
 Answer. 
 
128 Notes ox Foreign Exchange. 
 
 ^ centime represents .625 centime and .081 centime represents 1/64 of 1%, 
 therefore .783 centime equals .625 + . 157 centime, or nearly ^ + 1/32 of 1% of 
 franc value; when applied to dollars the plus sign becomes a minus, hence the rate 
 is 520^-1/32 
 
 (b) New York rate for 60 day bills 520. 783 
 
 Add 1-32 of 1%, discount on X.Y. funds 162 
 
 520.945 or 
 520^ +.00320 or 5205^-1/16. Answer. 
 
 Another way: 
 
 New York rate for 60 day bills = 5205^ - 1/32 
 
 Deduct discount on X.Y. funds 1/32 
 
 520^—1/16 
 
 (c) 60 day bill is worth in X.Y. 5.20783 or 5205^-1/32 
 
 23240 ^ 5 . 20783 = $4462 . 46. Answer, 
 or 60 day rate, 
 
 23240-^520^=4463.86 
 Less 1/32 1.40 
 
 4462.46. Answer. 
 
 Question 7. 
 
 (a) 953^ = 95.50 
 
 Add 1/32 of 1% .03 
 
 951^ + 1/32 = 95.53 
 
 Deduct 
 
 Interest at S]4% 
 
 (90 days on 95) 920 
 
 Stamp 05 
 
 Profit Vsoi 1% .11 9 1.089 
 
 94.441 = 
 94. 4375 + .004 = 94 7/16 
 
 (1/64 of 1% on 95 being equal to .00015 per four marks, 94 7/16 is the 
 nearest commercial quotation.) 
 
 (b) 94.441 
 Add 3/64 of 1% premium on Xew York funds 045 
 
 94.486 = 
 94 . 50 . 014 = 94 y^ - 1/64. Answer. 
 
 (c) -^1^1x42600 = .23610X42600 =$10,057. 86. Answer. 
 
 4 
 
 Ouestion 8. 
 
 (a) 40 lbs. Trov or 480 ounces standard gold are worth £1,869, therefore 1 ounce 
 standard gold = 1869/480 = £3.89375 or £3. 17s. lOJ^d. per ounce. 
 
 In 480 ounces of standard gold there are 440 ounces of pure gold (11 12); 
 therefore 1 ounce of pure gold = 1869/440 = £4.24772 or £4. 4s. 11.45d. per 
 ounce. 
 
 (b) 43 ounces Troy of mint gold are worth $800. 
 
 Therefore 1 ounce of mint gold is worth 800/43 =$18.60465 per ounce. 
 
 In 43 ounces of mint gold there are 9/10 or 38.7 ounces of pure gold. 
 
 Therefore 1 ounce of pure gold =;?,^-^ = $20.671834 + 
 
 3b. / 
 
(c) 1. 
 
 800 400 
 
 ;X 
 
 38.7 '^ 1869 
 
 Model Solutions 
 \ 
 
 (a&b) or $20. 671834 X 
 
 440 
 1869 
 
 (a & b) or 
 
 20.671834 
 
 4.24772 
 
 (c4) or 113.001605 .^^ 
 23.22 ^ 
 
 = $4.86656 
 
 129 
 
 (c) 2. An ounce of pure gold costs $20.671834 
 
 Less 1/12 1.722653 
 
 An ounce of standard gold is worth. . . .$18.949181 
 
 The conversion of £3.89375 at par into dollars would give the same result. 
 
 (c) 3. An ounce of pure gold costs £4.247727272 
 
 Less 1/10 424772727 
 
 An ounce of mint gold is worth £3.822954545 or £3. 16s. 5i^d. 
 
 (c) 4. $800 mint gold weighs 43 ounces; therefore 1 dollar weighs 43/800 ounces 
 or 43/800X480 grains =25.8 grains. Deducting 1/10 gives the weight 
 of pure gold in the dollar as 25.8-2.58=23.22. 
 
 A sovereign contains 480/1869 ounces or 480X480/1869 grains = 123.27447 
 grains. 
 
 Deducting 1/12 gives the weight of pure gold in the sovereign as 
 123.27447-10.27287 = 113.0016 grains, or 
 
 .^X480 grains = 113 1/623 grains or 113.001605. 
 1869 
 
 Question 9. 
 
 (1) Grammes of pure gold in franc = 
 
 1000 
 
 1 9 
 
 = 5-: = .2903225 grammes. 
 
 3444.44 4/9 3 4/9 31 
 Grammes of pure gold in mark = 1000/2790 = . 3584229 grammes. 
 
 (2) /2790 marks, therefore one mark = ^^^_^1^^ =$.238213 
 
 664 6144 
 $664.6144= 3280 crowns, " " crown = ^^^^ =$.202626 
 
 i 664 6144 
 
 3444 4/9 francs, " " franc = ". !..» =$• 192953 
 
 V 3444 4/9 
 
130 Notes ok Foreign Exchange. 
 
 Question 10. 
 
 (a) 1. £1,000 at 4.8675 = 4867.50 
 
 2. Francs 2000 at 5.18^-1/32 = 385.88 
 
 2000 -^ 5. 18125 = $386. 00 
 . Less 1/32 of 1% .12 
 
 $385.88 
 
 3. Marks 4000 at 96i<^ + l/64 = 962.65 
 
 (.96250 + .00015 = .-96265) 
 
 4. Florins 2000 at 40 + 1/64 = 800. 12 
 
 2000 X. 40 = 800 + (1-64 or .12) 
 
 5. Francs 400 at . 193 = 77.20 
 
 6. Local Currency $500 at 48.85 = 244.25 
 
 Answer = 7,337.65 
 
 (b) $1,000 at the above rates will purchase: 
 
 Sterling, 4.8675 = 1000^4.8675= Sterling, £205.4442 
 
 Francs, 5.18^-1/32 = Francs 5182.86 
 
 Marks, 96M + 1/64 = 1000 ^^^^= Marks 4155.19 
 
 Florins, 40 + 1/64 
 
 ($1000^.40=2500 
 
 less l/QA .39)= Florins 2499.61 
 
 Francs, at . 193 = 1000 ^ . 193 = Francs 5181 . 35 
 
 Local Currency at 48 . 85 = 1000 -^ . 4885 = Local Currency 2047 . 08 
 
TABLE 
 
 L 
 
 TABLE 
 
 IL 
 
 TABLE 
 
 IIL 
 
 TABLE 
 
 IV. 
 
 TABLE 
 
 V. 
 
 TABLE 
 
 VL 
 
 TABLE 
 
 VIL 
 
 TABLE VIIL 
 
 TABLE 
 
 IX. 
 
 TABLE 
 
 X. 
 
 TABLE 
 
 XL 
 
 APPENDIX D 
 
 TABLES 
 
 -Metal Contents of Gold Units. 
 
 -Equivalent Values of Monetary Units. 
 
 -French Exchange Table. 
 
 -German Exchange Table. 
 
 -Moneys of Account. 
 
 -Sixty-tourths Expressed in Decimals. 
 
 -Fractional Parrs of 1%. 
 
 -Foreign Terms. 
 
 -Moneys in Actual LTse. 
 
 -Symbols or Arbitrary Signs. 
 
 -Money Symbols. 
 
<0 
 
 (U 
 
 
 p 
 
 
 
 
 (0 
 
 > 
 
 c« 
 
 
 ^ 
 
 •l-l 
 
 4^ 
 
 c 
 
 c 
 
 (U 
 
 p 
 
 rr; 
 
 
 
 > 
 
 U 
 
 • p-^ 
 
 
 3 
 
 r/i 
 
 ^' 
 
 -I 
 
 UJ 
 
 
 
 
 • »-i 
 
 
 V-c 
 
 ^ 
 
 cC 
 
 C 
 CO 
 
 > 
 
 CO 
 
 4— t 
 
 
 
 UJ 
 
 -J 
 
 CQ 
 
 H (u i2 
 
 CJ 
 
 CO 
 
 CO 
 
 ^ (U 
 
 o 
 
 c 
 B 
 
 CD 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 00 
 
 
 
 
 
 1 
 
 
 
 13 
 
 r^ T}< t^ rt<C5 -*TfTj<T}< 00O51OO5 ^l^t^ 
 
 
 
 L. 
 
 •^X-H Tti OCOO TC(M(Mir5 »OC<l'-'C» t^^^ 
 
 
 
 rt 
 
 i-OTCiO r^coo icooo looo-^ic r^xoo 
 
 
 
 'O 
 
 t^ t-- iC t^ O O 05 CO t^ tc O t^ -^ ^ -H Tf (N t^ t^ 
 
 
 
 c 
 
 — <C^irC0O ^GCGCOO ClOOOOCC C-1(MC5^ (MOC5 
 
 1 
 
 
 — re— n>. co>OTf<co coiM^io c;cctDO io-^tjJ 
 
 C 
 
 2 
 
 o 
 
 
 cn 
 
 COOl-HIM tNtNC-l— 1 r-Hrtrtrt 
 
 
 
 
 .— ( ^H 1— t 
 
 
 
 
 
 
 »OiO o 
 
 
 
 
 
 
 (NO — iM lO COt^ <£>C0(MO (M^tJhO QCtTcn 1 
 
 
 
 
 ^^lOOCLO CO l>iO (N(N(N-^ ^rtt^C 
 
 J C: CO CO 
 
 
 
 <y 
 
 GC — OOO TfiO-Hco Q0'«*iTt<fO lOM'M'- 
 
 'TOO 
 
 
 
 c 
 
 r^oi^oc — c-iooo -^t^i^co t^roMro cxcc 
 
 
 
 il! 
 
 r^ c o o o c^ ■<tno C5 ic lO CO -rt ic c^i lo i^ '^ -* 
 '^rcc^iio Tticoc^c^i ^_^C5 oct^ccio Tf'Ti<-<# 
 
 
 
 
 -^— <OCq (N(NiM'-i ,-H^^ 
 
 
 
 
 
 
 »— t 1— 1 1— t 
 
 
 
 
 
 
 
 T3 
 
 
 ^^ 
 
 X 
 — CO t^ CO 
 
 
 
 u 
 
 >-0 Tt< CO LO 
 
 ■* t^ X t^ CO 
 
 
 
 a! 
 
 L^ Tt^ l~>-^H ^ OCOC^ 
 
 C CO 'M '^ i.O X X 
 
 
 
 TD 
 
 O CO ^XC^'* C^ICOCOC 
 
 .-H m CI t^ lO 10 
 
 
 
 C 
 
 OX:r:0 l^'-<(MO OCOCOIM <r:(MXX XC^KM 
 
 .i 
 
 
 rt 
 
 ox^o trsr-^HOi cdcocoi^ tnconno coc<ic-i 
 
 <n 
 
 
 4-> 
 
 iCO(NX OOCOX XXXO OlOt^CO COCOCO 
 
 lU 
 
 
 C/5 
 
 
 
 
 
 
 H 
 S 
 
 o 
 
 
 
 X t^t^ r-( ,— ( ,— t t-H 
 
 
 
 
 
 
 
 O CO 
 
 X C5 X C5 LO LO 
 
 
 
 (M 
 
 — (MX T}< 
 
 X X LO C^l X C^l !M 
 
 
 
 o 
 
 xco— 1 T}<co^i^ CO 
 
 r^ LO fM 'M t^ c^i c-l 
 
 
 
 c 
 
 LOCOtCt^ "-lOCOt^ C-l X — — C'lTf^ XCOCO 
 
 
 
 fe 
 
 t>-CaTjHi-0 OtJH^^ -^COrfi OXCOX -^oo 
 
 
 
 CO(M-HlM lOOUJiM t^iiOiOO -rl-XOO OC:C5 
 
 
 
 
 TticOOO iQiQ-^X t^t^t^O "-'^•^^CO C0C~1!M 
 
 
 
 
 t>. t^ CO <— ' T— 1 1— I .— 1 
 
 
 
 . 
 
 
 
 
 
 in 
 
 
 
 
 CJ 
 
 
 o 
 
 CO •* coco TtH -^^ic^ico vO;0 co:oo 
 
 3 
 
 
 u 
 
 CO X X^XCO t^XXC<l ^L-T C2— <-H 
 
 r; 
 
 c 
 
 1-^ X (M (35 CO lO C5 CO »0 lO X C^l t^ 
 
 C: lO 10 
 
 > 
 
 f 
 
 1< 
 
 COOOCO Orot^O iS^rt^O XCOCO— 1 cicioi 
 
 
 
 Tf-^^. O O-^-rfiCN (NC^10->^^ ,-H,— i^rt 
 
 
 
 
 (N (M (M 
 
 
 
 
 
 ■X- 
 
 
 tn 
 
 
 
 
 
 l> t^ 
 
 d) 
 
 
 
 -^ LO '^ '^ l-O t^ t - X !M '^ TtH 1 
 
 3 
 
 
 rt 
 
 C5 (O CO 'O C^l t^ CO O Tf "Tt" O <^.^C:^ 
 
 - --0 Ci 
 
 c:- 
 
 
 (MCOCOC ■* TfCO TPXX^ TtH-*t^X 0-1 'MiM 
 
 "rt 
 
 •^ ' 
 
 o 
 15 
 
 rfHtOOiX CO CC* »-HC:c:0 COIMCOCO OC:C3 
 
 > 
 
 c 
 
 OXCOO O C310 iCTt^Ti^Tti COCOC^l{M (M-H^ 
 
 
 
 ^^ ^1 ^5^ 1~ 
 
 y-< 1—1 
 
 
 
 
 
 o 
 
 (0 
 
 
 ^ ^ 
 
 C^\tN\ 
 
 
 
 tn 
 
 locodoo t-coco coco COCOC 
 
 c 
 
 
 ^ 
 
 o 
 
 1^1— (— lO 1— IOC"— 1 OCCO -h^hOC 
 
 OC'O 
 
 
 T 
 
 c 
 
 xcicitn OiO-.a-.c^ <zi a c. Ci cicicr. c 
 
 C^. !Z:Ci 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 • tn 
 
 
 
 
 
 
 
 
 
 
 
 
 tn 
 
 
 
 
 
 ^ 
 
 '::^ o 
 
 
 2 
 o 
 
 
 t/ 
 
 a, 
 
 1. 
 
 t/ 
 
 t/ 
 
 -,'tf 
 
 c 
 
 in 
 
 in 
 
 a 
 
 
 r- 
 
 tn 
 
 ct! c 
 
 ^ c 9- 
 
 ntavos) 
 nnas) . . 
 
 ifennige 
 
 heller) . 
 
 :entiines 
 
 centav 
 
 
 4-) 
 
 
 5..— ~r: 
 
 00 ce 
 (100 ^ 
 00 ce 
 
 doni 
 
 (100 
 ^0 sci 
 00 ce 
 
 ' 1 on f 
 
 00 ce 
 (10 a 
 (100 
 
 1 no r 
 
 (100 
 100 c 
 (100 
 
 
 
 O tn (^ C 
 
 1-H »— 1 ff 
 
 n , »— * 
 
 1-H ^^- 
 
 ._, — ' ^ 
 
 
 
 
 £E(10 
 £ (20 
 £T (11 
 Esc lid 
 
 0:2 o !: 
 
 tn 7; tn — 
 OJ ° 0^ 
 
 Roubli 
 Yen (] 
 Peso ( 
 Florin 
 
 Peso ( 
 Rupee 
 Crown 
 
 Mnrlr 
 
 Crown 
 
 Franc 
 
 Boliva 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ._o 
 •'c 
 
 >> 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 ct 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 "3 
 
 
 
 
 
 
 
 
 
 '.2 
 
 c C 
 3 
 
 
 
 ^ 
 
 
 
 .^ 
 
 
 
 ?■ rt 
 
 
 
 
 ir'> K. 
 
 h-"- ctf 
 
 
 O 
 
 
 4~ 
 
 c 
 > 
 
 m > 
 
 ^ O >- 
 
 
 U ~ u u 
 
 .- c 
 
 
 ;-^ 
 
 *" ^ 
 
 nstria-1 
 atin Un 
 enezuel 
 
 
 
 
 u. 
 
 ^ 
 
 ■ 
 
 ^ 
 
 
 z 
 
 < 
 
 ^.* 
 
 «^ ^ 
 
 -,Sn: 
 
 ^-^ 
 
 ~CA 
 
 N-' 
 
 < 
 
 -- 
 
 > 
 
 
 01 
 
 bo 
 
 tn 
 
 'c3 
 
 (M 
 
 CO 
 10 
 
 c 
 o 
 
 -o 
 a> 
 tn 
 
 tn 
 
 C 
 O 
 
 3 
 
 o 
 
 en 
 o 
 
 Oi 
 
 
 
 rn 
 
 
 
 r 
 
 -i: 
 
 
 -j-j 
 
 n! 
 
 
 
 
 
 c 
 
 
 
 10 
 
 r 
 
 CO 
 
 
 (M 
 
 oco 
 
 
 TtH 
 
 
 
 Q 
 
 10 
 
 1-H 
 
 
 C 
 
 
 
 
 
 
 CJ 
 
 J3 
 
 4-> 
 
 rn 
 
 
 
 C 
 
 3 
 
 
 
 rr 
 
 
 
 
 tn 
 
 nl 
 
 QJ 
 
 
 3 
 
 3 
 
 
 u 
 
 rt 
 
 
 > 
 
 r ) 
 
 132 
 
-J 
 
 CQ 
 < 
 
 CO 
 (U 
 
 C 
 
 o 
 U 
 
 CO 
 
 p 
 
 O 
 
 > 
 
 o 
 
 CO 
 
 4-1 
 • ^4 
 
 c 
 D 
 
 CO 
 
 4-1 
 
 (U 
 
 c 
 o 
 
 
 CO 
 
 > 
 
 c 
 
 > 
 
 P 
 
 c 
 
 a 
 
 4-1 
 
 a 
 
 4-1 
 
 CD 
 
 
 oa: 
 
 ^ 
 
 Or-l 
 
 coco 
 
 OCD CD 
 
 05 GOCO 
 
 •SI 
 
 tn -^ t^ CO (M 
 
 t^ CO 
 
 ^ CO 
 
 GO CO CO 
 
 u lo CO o o 
 
 10 00 CO 
 
 iM CD ^ 
 
 00 >o 1— 1 
 
 C ^ Ol O (M 
 
 CD CO 
 
 CO 'H r-l 
 
 CO -^o 
 
 03 C 
 
 rt (M Oi <ri GO 
 
 OCOCD CO 
 
 00 05 00 
 
 GO CO 10 
 
 JD 
 
 tL, . . . . 
 lO lO lO lO 
 
 OOCD >C 
 
 000 CO 
 
 CO (MO 
 
 
 LO C^l IM (M 
 
 (M ^ T-4 
 
 T ^ 1 ^ 1 ^ T— I 
 
 1 >> 
 
 cr> ^ O (M 
 
 00 CO 00 
 
 ^CD .-1 
 
 T-* t^- 00 
 
 rt 1- 
 
 ?2 iM (M ^ G2 
 5 ^ CO ^ -H 
 ^ t^ iM -t lO 
 
 GO CO 00 
 
 Tt OCD 
 
 GO IM lO 
 
 
 (M ^ ^ 
 
 t^ CO 1—1 
 
 10 CO (N 
 
 ^ >oci 
 
 CO r^ ^ 
 
 (M 10 (M 
 
 tfi c 
 
 O --I CO O CO 
 
 CD Ol CO CD 
 
 0000 
 
 (M r^ 10 
 
 3 3 
 
 U O CO T-H C2 
 
 t^ CD 10 -* 
 
 C2 GO CD 
 
 CO --H Ci 
 
 <K 
 
 u • • • • 
 
 ^ lO i-O 'i* 
 (M 
 
 ^ iM C^ (M 
 
 T-H 1— 1 T— 1 
 
 1— 1 T— 1 T— 1 
 
 >^ 
 
 CO -H c^l 
 
 C^l CO 
 
 IM CDCO 
 
 00 
 
 c 
 
 c« O CO CO (M 
 
 CD -^ 
 
 OCD 
 
 -HO 
 
 rt 
 
 ^ ^ t^ O Ci 
 
 t^ -^ 10 
 
 CO M 
 
 coo 
 
 r^ 
 
 1-. C2 lO •-< t^ 
 
 (M (M 
 
 t^(M r-H 
 
 >o 00 
 
 — 
 
 "3 (M CO -Tti C2 
 
 LOO CD C2 
 
 GO CO CD 
 
 (M >0 -H 
 
 <L> 
 
 ^^ifiCO ^ 
 
 OC^l r-lC 
 
 CD 10 CO 
 
 '-I 0000 
 
 o 
 
 O Tfl Tt< TjH 
 
 -^ IM <M (M 
 
 1 — \ ^H ^ — I 
 
 J—l 1— 1 
 
 c 
 
 lo -^ CO lo 
 
 oooc 
 
 ^CC ^ 
 
 ot- 
 
 1.1 
 
 S — 1 o iM CZ3 
 g lO t-^ !M -tH 
 
 IS Ol ^ GO ^ 
 
 0— IOC 
 
 CD CO 
 
 oooio 
 
 O'H c 
 
 02 Oi CD 
 
 0000 
 
 GO 00c 
 
 .-1 
 
 coco 
 
 •js c; 
 
 O to CO i-O CO 
 
 OCO ^ CD 
 
 OJ CD ^ 
 
 00iO(M 
 
 ^^ 
 
 I- r-H OGOt^ 
 
 CD OOCO 
 
 '^CO IM 
 
 CO t^i> 
 
 rt 
 
 CO -^ CO CO 
 
 CO (N i-H .-^ 
 
 1— 1 1— ( 1— 1 
 
 T— 1 
 
 CJ 
 
 1—1 
 
 
 
 "•^ 
 
 CO 
 
 
 
 
 
 ■a 
 
 OOOCD 
 
 (M OOC: 
 
 CO ^ 
 
 r-O 
 
 t« 1— 1 -H O ^H 
 
 10 CD ■* t- 
 
 CO -Tfl 
 
 CO CI CO 
 
 c 
 
 c — 1 o 03 CO 
 
 -H r^ ^ C 
 
 0—1 
 
 t- CDO 
 
 n 
 
 •r t^ o) (M t^ 
 
 ooooc 
 
 cor^ 
 
 CD(M tHO 
 
 zn^ 
 
 o o GO t^ 00 
 
 LOGO 't 
 
 00 
 
 CD CO 
 
 o 
 
 — .— 1 CO LO -Jtl 
 
 fc ■ ■ • • 
 
 iM C^l (M IM 
 
 T— t 
 
 ■* CO (M C5 
 
 C3 00 
 
 CO to 10 •* 
 
 (M ^^ ■- 
 
 T— 1 
 
 
 _ D 
 
 CO O CO 
 
 (M CDt-- '- 
 
 0(M 00 
 
 CO CO CO 
 
 m cot- CO 
 iScDOrtH 
 
 CD CD CD CD 
 
 CD C5 CO 
 
 en -H (M 10 
 
 jz.:i 
 
 t^ 1— I 10 Tt 
 
 C3 C2 -rt^ 
 
 05 (M CD 05 
 
 ■i-* l-H 
 
 '*< CD -* OC 
 
 -H -* Tt< 
 
 t-00£M (M 
 
 
 7; CD GO CO 
 °00OO 
 
 CD ■* 'H C; 
 
 OcDiM 
 
 CD CO 02 
 
 05 >0 10 Tt 
 
 r^^COCO 
 
 (MtNlMi-H 
 
 ■<# I— 1 "-H 1— 1 
 
 
 
 
 
 
 
 
 CO 
 
 
 GO 00 -H 
 
 Tt< l^ ^ t-- 
 
 ^ 
 
 iM C0COC5 
 
 
 CJ oco ^ 
 
 CO t^ (M ^ 
 
 
 
 (M t^ t^ cS 
 
 
 U r+l -t< CD 
 
 CO ^ ^ <M 
 
 CO 
 
 CD t-- (M 10 
 
 
 c 000^ 
 
 t^ CO r^ oc 
 
 (M 
 
 1— 1 -^ Oi 1— 1 
 
 r1 
 
 <1> iM CO 
 
 lO C5 CO "O 
 
 00 
 
 (MI> Oi 10 
 
 '3 
 
 CL, . . . . 
 
 
 
 
 Oco ^ 
 
 t^cD "o T^ 
 
 01 GO CO 
 
 CO 1—1 Oi 
 
 
 •^ lO 10 ■* 
 
 Tf<(N(N (N 
 
 tH 7— ( 1— ( 
 
 T— ( r-H 
 
 1-1 
 
 (M 
 
 
 
 
 
 
 
 
 c3 
 
 U5 acc^ 
 
 CO X "O CD 
 
 CO CO 
 
 OOOCO Oi 
 
 O 
 
 -O ^ 1—1 GO 
 
 '^(MCOC^ 
 
 CO 
 
 CO '*C0 TtH 
 
 Ui 
 
 n oio -^ 
 
 (MiM t^-f 
 
 lO CO 
 
 Oi CO CO 
 
 o 
 
 3 (M (M 10 
 
 QO (M O (M 
 
 IM LOcO 
 
 10 00 1— 1 03 
 
 -H OC 
 
 CO t^co 
 
 >o Tfi Tt<co 
 
 
 T— 1 1— ( .— 1 1 1 
 
 000 
 
 0000 
 
 
 6« C v. 
 
 -J^ g 
 
 5* 1^ 
 
 s-ta s ^ 
 
 
 
 •5 
 
 
 
 
 § ^ 5 s 
 S =3 S c3 
 
 3 ! • ■ 
 
 
 
 c3 
 
 
 
 
 
 
 
 D •> : 
 
 d • 
 
 
 
 
 
 
 
 
 3 • biO : 
 
 d 
 
 • -ri 
 
 U. 
 
 
 
 
 
 
 
 rt ICC 
 
 3 
 
 c3 ; 
 
 OJ 
 
 
 
 
 
 
 ^-^ 
 
 
 o 
 U 
 
 t^3 b 
 
 0+J 
 
 C 
 
 N 
 
 
 
 c 
 ct; 
 
 
 u 
 
 _a3 
 
 ■a 3 ^ d 
 
 C 3 4-> ." 
 
 
 £iS25 
 
 £f2 3 E 
 
 - "olS-H 
 
 
 
 Ocu^ 
 
 J?; 
 
 <cc 
 
 Di 
 
 
 , X 
 
 
 
 ►i; 
 
 bO 
 
 en 
 
 C 
 
 'c3 
 I-. 
 bt) 
 
 »o 
 
 CO 
 (N 
 
 CO 
 
 lO 
 
 3 
 O 
 
 OJ 
 tn 
 c« 
 
 3 
 O 
 
 U 
 
 133 
 
TABLE III. 
 
 Table showing various values of $1,000 and Fes. 1,000 at rates of 
 exchange ranging from Francs 5.10 to Francs 5.25 per dollar. 
 
 See Section 35 for Elxplanation 
 
 c 
 
 
 
 
 
 $1,000 
 
 Rate of 
 
 Fes. 1,000 
 
 160 
 
 
 Exchange 
 
 
 816 
 
 Fes. 5,100. 
 
 5.10 
 
 $196.078431 
 
 
 . 797 
 
 
 . 030637 
 
 817 
 
 5,106.25 
 
 5.10^ 
 
 105.838433 
 
 
 .798 
 
 
 . 030599 
 
 818 
 
 5,112.50 
 
 5.11M 
 
 195.599032 
 
 
 . 799 
 
 
 .030562 
 
 819 
 
 5,118.75 
 
 5. UK 
 
 195.360195 
 
 
 .800 
 
 
 .030525 
 
 820 
 
 «S,125. 
 
 5.123^ 
 
 195.121951 
 
 
 .801 
 
 
 . 030487 
 
 821 
 
 5,131.25 
 
 5.131^ 
 
 194.884287 
 
 
 .802 
 
 
 . 030450 
 
 822 
 
 5,137.50 
 
 5.13M 
 
 194.647202 
 
 
 .803 
 
 
 .030413 
 
 82,3 
 
 5,143.75 
 
 5.14^ 
 
 194.410693 
 
 
 .8038 
 
 
 .030377 
 
 824 
 
 5,150. 
 
 5.15 
 
 194.174757 
 
 
 .8048 
 
 
 . 030340 
 
 825 
 
 5,156.25 
 
 5.15^ 
 
 193.939394 
 
 
 .8058 
 
 
 . 030303 
 
 826 
 
 5,162.50 
 
 5.16M 
 
 193.704600 
 
 
 .8068 
 
 
 .030266 
 
 827 
 
 5,168.75 
 
 5.16J^ 
 
 193.470375 
 
 
 .8078 
 
 
 . 030230 
 
 828 
 
 5,175. 
 
 5.17M 
 
 193.236715 
 
 
 .8087 
 
 
 . 030193 
 
 829 
 
 5,181.25 
 
 5.183^ 
 
 193.003619 
 
 
 .8097 
 
 
 .030157 
 
 830 
 
 5,187.50 
 
 5.18% 
 
 192.771084 
 
 
 .8107 
 
 
 .030120 
 
 831 
 
 5,193.75 
 
 5.193,8 
 
 192.539109 
 
 
 .8117 
 
 
 . 030086 
 
 832 
 
 5,200. 
 
 5.20 
 
 192.307692 
 
 
 .8126 
 
 
 . 030048 
 
 833 
 
 5,206.25 
 
 5.20% 
 
 192.076831 
 
 
 .8136 
 
 
 . 03001 1 
 
 834 
 
 5,212.50 
 
 5.21M 
 
 191.846521 
 
 
 .81Jf6 
 
 
 . 029977 
 
 835 
 
 5,218.75 
 
 o.21J^ 
 
 191.616766 
 
 
 .8156 
 
 
 .029941 
 
 836 
 
 5,225. 
 
 5.22H 
 
 191.387560 
 
 
 .8516 
 
 
 . 029904 
 
 837 
 
 5,231.25 
 
 5.233^ 
 
 191.158901 
 
 
 .8175 
 
 
 . 029866 
 
 838 
 
 5,237.50 
 
 5.23% 
 
 190.930787 
 
 
 .8185 
 
 
 .029828 
 
 839 
 
 5,243.75 
 
 5.24 3^ 
 
 190.703218 
 
 
 .8195^ 
 
 
 .029791 
 
 840 
 
 5,250. 
 
 5.25 
 
 190.476190 
 
 
 .8204 
 
 
 . 029753 
 
 The addition or substraction of the decimals in italics from the rates give 
 sufficiently close results for all i)ractical purposes. To obtain the e.vflc/ value of the 
 dollar, it would be necessary to find the reciprocal of the net cent value of the franc 
 after allowing for the fraction. 
 
 520 + 1/64 by the table would be 5 20— .0008126= 5. 1991874 
 The exact value is found bv finding the value of the franc at 5.20 + 1/64 = 
 .192307692 + .000030048 = . 19233774 which divided into unitv will give 
 the e.xact value of the dollar as 5. 1991876. 
 
 134 
 
TABLE IV. 
 
 Statement Showing Values of $1,000 and Marks 1,000 at Varying 
 
 Rates of Exchange. 
 
 See Section 42 for Explanation. 
 
 c 
 
 
 
 
 C 
 
 
 
 
 
 $1,000 
 
 Rate 
 
 Mks. 1,000 
 
 
 $1,000 
 
 Rate 
 
 Mks. 1,000 
 
 
 
 3200 
 
 
 
 
 3200 
 
 
 
 
 
 Marks 
 
 
 Dollars 
 
 
 Marks 
 
 I* 
 
 Dollars 
 
 752 
 
 4,255.3191 
 
 94 
 
 235.000 
 
 
 . 6561 
 
 
 . 0372070 
 
 
 .6647 
 
 
 .0367188 
 
 
 4,196.7213 
 
 95A 
 
 238.28125 
 
 
 4,252.4917 
 
 94 A 
 
 235.15625 
 
 
 .6556 
 
 
 .0372314 
 
 
 .66U 
 
 
 . 0367432 
 
 
 
 
 
 
 
 
 
 763 
 
 4,193.9712 
 
 953^ 
 
 238.43750 
 
 753 
 
 4,249.6680 
 
 943^8 
 
 235.31250 
 
 
 .6551 
 
 
 . 0372558 
 
 
 . 6639 
 
 
 . 0367676 
 
 
 4,191.2246 
 
 95i^ 
 
 238.59375 
 
 
 4,246.8480 
 
 94^ 
 
 235.46875 
 
 
 .6548 
 
 
 . 0372802 
 
 
 . 6634 
 
 
 . 0367920 
 
 
 
 
 
 
 
 
 
 764 
 
 4,188.4817 
 
 95>^ 
 
 238.75000 
 
 754 
 
 4,244.0318 
 
 94 M 
 
 235.62500 
 
 
 .6544 
 
 
 . 0373047 
 
 
 . 6630 
 
 
 .0368164 
 
 
 4,185.7423 
 
 95^ 
 
 238.90625 
 
 
 4,241.2194 
 
 94 A 
 
 235.78125 
 
 
 .6539 
 
 
 . 0373291 
 
 
 .6626 
 
 
 . 0368408 
 
 
 
 
 
 
 
 
 
 765 
 
 4,183.0065 
 
 95^ 
 
 239.06250 
 
 755 
 
 4,238.4106 
 
 .6622 
 
 943^ 
 
 235.93750 
 
 . 0368652 
 
 
 . 6535 
 
 
 . 0373535 
 
 
 4,235.6056 
 
 94 i^ 
 
 236.09375 
 
 
 4,180.2743 
 
 95H 
 
 239.21875 
 
 
 .6618 
 
 
 . 0368896 
 
 
 . 6530 
 
 
 . 0373779 
 
 
 
 
 
 766 
 
 4,177.5457 
 
 95% 
 
 239.37500 
 
 756 
 
 4,232.8042 
 
 .6613 
 
 941^ 
 
 236.25 
 
 .0369141 
 
 
 . 6526 
 
 
 . 0374023 
 
 ^ 
 
 4,230.0066 
 
 94^ 
 
 236.40625 
 
 
 4,174.8206 
 
 95 M 
 
 239.53125 
 
 
 .6608 
 
 
 . 0369385 
 
 
 . 6522 
 
 
 .0374267 
 
 
 
 
 
 767 
 
 4,172.0991 
 
 95 J^ 
 
 239.68750 
 
 757 
 
 A, 221 .2X21 
 
 94 H 
 
 236.56250 
 
 
 .6518 
 
 
 .0374512 
 
 
 .6604 
 
 
 . 0369629 
 
 
 4,169.3811 
 
 95M 
 
 239.84375 
 
 
 4,224.4224 
 
 94 H 
 
 236.71875 
 
 
 .6514 
 
 
 . 0374756 
 
 
 .6599 
 
 
 . 0369873 
 
 
 
 
 
 
 
 
 
 768 
 
 4,166.6666 
 
 96 
 
 240. 
 
 758 
 
 4,221.6359 
 
 94^1 
 
 236 . 87500 
 
 
 .6510 
 
 
 . 0375 
 
 
 . 6595 
 
 
 .0370117 
 
 
 4,163.9558 
 
 oe^e 
 
 240.15625 
 
 
 4,218.8530 
 
 94 M 
 
 237.03125 
 
 
 .6506 
 
 
 .0375244 
 
 
 .6591 
 
 
 , 0370361 
 
 
 
 
 
 
 
 
 
 769 
 
 4,161.2484 
 
 96 K 
 
 240.31250 
 
 759 
 
 4,216.0738 
 
 MVs 
 
 237.18750 
 
 
 . 6501 
 
 
 . 0375488 
 
 
 . 6587 
 
 
 . 0370605 
 
 
 4,158.5445 
 
 96 A 
 
 240.46875 
 
 
 4,213.2982 
 
 94 H 
 
 237.34375 
 
 
 .6497 
 
 
 . 0375732 
 
 
 .6582 
 
 
 . 0370850 
 
 
 
 
 
 
 
 
 
 770 
 
 4,155.8442 
 
 9634 
 
 240.62500 
 
 760 
 
 4,210.5263 
 
 95 
 
 237.5 - 
 
 
 . 6493 
 
 
 .0375976 
 
 
 . 6578 
 
 
 .0371094 
 
 
 4,153.1473 
 
 96 A 
 
 240.78125 
 
 
 4,207.7581 
 
 95 A- 
 
 237.65625 
 
 
 .6488 
 
 
 . 0376220 
 
 ^ 
 
 .6574 
 
 
 .0371338 
 
 
 
 
 
 
 
 
 
 771 
 
 4,150.4540 
 
 96? 8 
 
 240.93750 
 
 761 
 
 4,204.9934 
 
 953^ 
 
 237.81250 
 
 
 .6484 
 
 
 .0376464 
 
 
 .6569 
 
 
 .0371582 
 
 
 4,147.7641 
 
 963^ 
 
 241.09375 
 
 
 4,202.2324 
 
 95A 
 
 237.96875 
 
 
 .6480 
 
 
 . 0376708 
 
 
 .6565 
 
 
 .0371826 
 
 
 
 
 
 
 
 
 
 772 
 
 4,145.0777 
 
 963^ 
 
 241.25000 
 
 762 
 
 4,199.4751 
 
 95M 
 
 238.12500 
 
 
 .6475 
 
 
 . 0376962 
 
 135 
 
TABLE V. 
 
 Moneys of Account Used in the Different Countries of the World 
 
 Currency 
 
 
 
 
 
 Approximate 
 
 in which 
 
 
 
 
 
 Equivalents 
 
 drafts 
 
 M. 
 S. 
 
 Country 
 
 Monetary Unit 
 
 
 
 should be 
 
 Dollars 
 
 Sterling 
 
 drawn 
 
 
 
 
 
 S c. 
 
 £ s d 
 
 £Fcs 
 
 *S 
 
 Abyssinia 
 
 
 Maria Theresa Dollar and Talari 
 
 46.04 
 
 1.11 
 
 £ 
 
 *S 
 
 Afghanistan 
 
 
 Rupee (Iti -Annas) India 
 
 32.44 
 
 1. 4 
 
 $ 
 
 G 
 
 Alaska, 
 
 {U.S.A.) 
 
 Dollar (100 cents) U.S.A. 
 
 1.00.000 
 
 4. IH 
 
 Fcs£ 
 
 G 
 
 Algeria 
 
 (France) 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 . 934 
 
 £S 
 
 G 
 
 Argentine Repu 
 
 blic 
 
 Peso (100 Centavos) 
 
 96.476 
 
 4. 
 
 £ 
 
 G 
 
 Australia 
 
 (Gt. Brit): 
 
 Pound Sterling, Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £ Mks 
 
 G 
 
 Austria-Hungary 
 
 Krone (lOU Heller) 
 
 20 262 
 
 .10 
 
 £ 
 
 *S 
 
 Baltichistan 
 
 {Gt. Brit.) \Rupee (IG Annas) India 
 
 32.44 
 
 1. 4 
 
 Fes 
 
 G 
 
 Belgium 
 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 . <m 
 
 £$ 
 
 G 
 
 Bolivia 
 
 
 Boliviano (100 Centavos) 
 
 38.93 
 
 1. 7J^ 
 
 £ 
 
 G 
 
 Borneo 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £$ 
 
 G 
 
 Brazil 
 
 
 Milreis (1,000 Reis) 
 
 54.634 
 
 2. 2% 
 
 £$ 
 
 G 
 
 British Guiana 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £Fcs 
 
 G 
 
 Bulgaria 
 
 
 Lew (100 Stotinki) Latin Union 
 
 19.295 
 
 9H 
 
 £ 
 
 S 
 
 Burma 
 
 {Gt. Brit.) 
 
 Rupee (16 Annas) India 
 
 32.44 
 
 1. 4 
 
 S 
 
 G 
 
 Canada 
 
 {Gt. Brit.) 
 
 Dollar (100 Cents) 
 
 1.00.000 
 
 4. IH 
 
 £ 
 
 G 
 
 Cape Colony 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £ 
 
 S 
 
 Cevlon 
 
 {Gt. Brit.) 
 
 Rupee (100 Cents) India 
 
 32,44 
 
 1. 4 
 
 £ 
 
 G 
 
 Chili 
 
 
 Peso (100 Centavos) 
 
 36.499 
 
 1. OM 
 
 Mex. $ 
 
 *S 
 
 China 
 
 
 Dollar (100 Cents) 
 
 50 . 000 
 
 2. 1 
 
 Mex. $, £, $ 
 
 s 
 
 Hongkong 
 
 (G/. Br!i.): Dollar (100 Cents) 
 
 49.000 
 
 2. 014 
 
 $£ 
 
 s 
 
 Shanghai 
 
 iTael (10 Mace or 100 Candareens) 
 
 69.000 
 
 2.10)4 
 
 £$ 
 
 *G 
 
 Columbia. U.S. ( 
 
 3f iPeso (100 Centavos) 
 
 1.00.000 
 
 4.1J4 
 
 Fcs£ 
 
 G 
 
 Congo Free State {Belg'm) 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 QH 
 
 £$ 
 
 G 
 
 Costa Rica 
 
 
 Colon (100 Centimes) 
 
 46.535 
 
 i.iOM 
 
 $ 
 
 S 
 
 Cuba 
 
 {U.S.A.) 
 
 Peso (100 Centavos) 
 
 92.6 
 
 3.10 
 
 £ 
 
 G 
 
 Denmark 
 
 
 Krone (100 Ore) Scan. Union 
 
 26.797 
 
 1. IH 
 
 £$ 
 
 G 
 
 Dominican Republic 
 
 Dollar (100 Cents) 
 
 1.00.000 
 
 4. VA 
 
 £$ 
 
 G 
 
 Dutch Guiana 
 
 {Holland) 
 
 Guilder (100 Cents) Holland 
 
 40.196 
 
 1. 8M 
 
 £$ 
 
 G 
 
 Ecuador 
 
 
 Sucre (100 Centavos) 1/10 of £ 
 
 48 . 666 
 
 2. 
 
 £ 
 
 G 
 
 Egypt 
 
 {Gt. Brit.) 
 
 Pound (100 Piastres or 1,000 Milliemes) 
 
 4.94.29 
 
 1. 0. 3},i 
 
 £ 
 
 G 
 
 England 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £ 
 
 G 
 
 Faroe Islands 
 
 {Denmark) 
 
 Krone (100 Ore) Scan. Union 
 
 26.797 
 
 1. VA 
 
 £, Fes, Mks 
 
 G 
 
 Finland 
 
 {Russia) 
 
 Finmark (100 pennia) Scan. Union 
 
 19.295 
 
 9H 
 
 £ 
 
 G 
 
 Fiji 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.066 
 
 1. 0. 
 
 £ 
 
 G 
 
 France 
 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 9M 
 
 £ Mks 
 
 S 
 
 German E. Africa {Ger.) 
 
 Rupee (100 Heller) India 
 
 32.44 
 
 1. 4 
 
 £ 
 
 G 
 
 German Empire 
 
 
 Mark (100 Pfennige) 
 
 23.818 
 
 1. 
 
 £ 
 
 G 
 
 Great Britain 
 
 
 Pound Sterling (20 Shillings or 240 
 Pence or 960 Farthings) Stg. 
 
 4.86.666 
 
 1. 0. 
 
 Fcs£ 
 
 G 
 
 Greece 
 
 
 Drachma (100 Lepta) Latin Union 
 
 19 . 295 
 
 9H 
 
 £$ 
 
 *S 
 
 Guatemala 
 
 
 Peso (8 Reales or 100 Centavos) 
 
 ■14.46 
 
 I.IOH 
 
 $ 
 
 G 
 
 Hawaii 
 
 {U.S.A.) 
 
 Dollar (100 Cents) U.S.A . 
 
 1.00.000 
 
 4. VA 
 
 £ $ 
 
 *G 
 
 Haiti 
 
 
 Gold Gourde (5 Francs or 100 Cen- 
 times) 
 
 96.476 
 
 4. 
 
 £, Fes, Mks 
 
 G 
 
 Holland 
 
 • 
 
 Guilder or Florin (100 Cents) Holland 
 
 40.196 
 
 1. 8K 
 
 £$ 
 
 *S 
 
 Honduras 
 
 
 Peso (100 Centavos) 
 
 44.46 
 
 1 . W'A 
 
 £ 
 
 G 
 
 Iceland 
 
 {Denmark) 
 
 Krone (100 Ore) Scan. Union 
 
 26.797 
 
 1- VA 
 
 £ 
 
 G 
 
 India 
 
 {Gt. Brit.) 
 
 Rupee (16 Annas or 102 Pies) 
 
 32.44 
 
 1. 4 
 
 Fcs£ 
 
 *S 
 
 Indo-China 
 
 {France) 
 
 Piastre (100 Cents) 
 
 41.4 
 
 1. 8M 
 
 Fes 
 
 G 
 
 Italy 
 
 
 Lira (100 Centesimi) Latin Union 
 
 19.295 
 
 9H 
 
 £ Mex. $ 
 
 G 
 
 Japan 
 
 
 Yen (100 Sen) Japan 
 
 49.846 
 
 2. 1 
 
 £ Mex. $ 
 
 G 
 
 Java 
 
 {Holland) 
 
 Florin (100 Cents) Holland 
 
 40.19(5 
 
 1. S'i 
 
 £ Mex. $ 
 
 G 
 
 Korea 
 
 {Japan) 
 
 Won (100 Chon) Japan 
 
 49.846 
 
 2. 1 
 
 $ 
 
 G 
 
 Liberia 
 
 
 Dollar (100 Cents) 
 
 1.00.000 
 
 4. m 
 
 Fes, Mks 
 
 G 
 
 Luxemburg 
 
 
 French, German & Dutch money cur. 
 
 
 
 Mex. S 
 
 *G 
 
 Manchuria 
 
 {Japan) 
 
 Yen (100 Sen) Japan 
 
 49.846 
 
 2. 1 
 
 Fes, £. $ 
 
 G 
 
 Martinique 
 
 {France) 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 9M 
 
 S 
 
 *G 
 
 Mexico 
 
 
 Peso (100 Centavos) 
 
 49.844 
 
 2. 1 
 
 £ Fes 
 
 G 
 
 Monaco 
 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 9M 
 
 Fes, Mks 
 
 G 
 
 Montenegro 
 
 
 Austrian & Russian money current 
 
 
 
 £, Fes 
 
 G 
 
 Morocco 
 
 
 Spanish & French money current 
 
 19.295 
 
 9H 
 
 £ 
 
 G 
 
 Natal 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.80.666 
 
 1. 0. 
 
 £ 
 
 G 
 
 Netherlands 
 
 
 See Holland 
 
 
 
 $£ 
 
 G 
 
 Newfoundland 
 
 {Gt. Brit.) 
 
 Dollar (100 Cents) 
 
 1.01.430 
 
 4. 2 
 
 £ 
 
 G 
 
 New Zealand 
 
 {Gt. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.0001 
 
 1. 0. 
 
 £$ 
 
 G 
 
 Nicaragua 
 
 
 Cordoba (100 Centavos) U.S.A. 
 
 1.00.000 
 
 4. VA 
 
 £ 
 
 G 
 
 Nor^vay 
 
 
 Krone (100 Ore) Scan. Union 
 
 26.797 
 
 1. Wi 
 
 $ 
 
 G 
 
 Panama 
 
 
 Bnlhoa (2 Pesos or 100 Cents) U.S.A. 
 
 1 . 00 . 000 
 
 4. \V2 
 
 136 
 
Moneys of Account Used in the Different Countries of the World — ('ordntued. 
 
 Currency 
 in which 
 
 dfHttS 
 
 M. 
 
 S. 
 
 Country 
 
 Monetary Unit 
 
 Approximnte 
 Equivalenis 
 
 should be 
 
 
 
 drawn 
 
 
 
 
 Dollars 
 
 Sterling 
 
 
 
 
 Kran (20 Shahis) 
 
 8 c. 
 7 . 500 
 
 £ 8 rt 
 
 £, Fes 
 
 *S 
 
 Persia 
 
 4 
 
 •£$ 
 
 G 
 
 Peru 
 
 Libra (10 Soles, 100 Dineros, 1,000 
 
 
 
 
 
 
 Centavos) 
 
 4.86.666 
 
 1. 0. 
 
 $ 
 
 S 
 
 Philippine Is. {U.S.A.) 
 
 Peso (100 Centavos) U.S.A. 
 
 50.000 
 
 2. \K 
 
 $£ 
 
 G 
 
 Porto Rico {U.S.A.) 
 
 Dollar (100 Cents) U.S.A. 
 
 1.00.000 
 
 4. IM 
 
 £ Fes 
 
 G 
 
 Portugal 
 
 Escudo (100 Centavos, 1,000 Reis) 
 
 1.08.0.50 
 
 4. 5 
 
 Fcs£ 
 
 G 
 
 Roumania 
 
 Lew (100 Bani) Latin Union 
 
 19 . 295 
 
 9H 
 
 £ Fes 
 
 G 
 
 Russia 
 
 Rouble (100 Kopecks) 
 
 51.4,56 
 
 2. IVi 
 
 £$ 
 
 *S 
 
 Salvador 
 
 Peso (100 Centavos) 
 
 44.46 
 
 1.10\4 
 
 Fcs£ 
 
 G 
 
 Serbia 
 
 Dinar (100 Paras) Latin Union 
 
 19 , 295 
 
 9% 
 
 £ 
 
 G 
 
 Siam 
 
 Dos (10 Ticals, 40 Salungs, 1,000 
 
 
 
 
 
 
 Satangs) 
 
 3.70.84 
 
 15. 5J^ 
 
 £ 
 
 G 
 
 Sou. Africa (Br.) {Cl. Brit.) 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 £ Fes 
 
 G 
 
 Spain 
 
 Peseta (100 Centesimos) Lalin Union 
 
 19 . 295 
 
 9K 
 
 £ 
 
 S 
 
 Straits Seitlm'ts {Cl. Brit.) 
 
 British Dollar (100 Cents) 
 
 56.77 
 
 2. 4 
 
 £ Mex. $ 
 
 G 
 
 Sumatra {Holland) 
 
 Florin (100 Cents) Holland 
 
 40.196 
 
 1. 8H 
 
 £ Mks 
 
 G 
 
 Sweden 
 
 Krona (lOO Ore) Scan. Union 
 
 26.797 
 
 1. 1^ 
 
 Fcs£ 
 
 G 
 
 Switzerland 
 
 Franc (100 Centimes) Latin Union 
 
 19.295 
 
 9M 
 
 Fcs£ 
 
 G 
 
 Tunis {France) 
 
 Franc (100 Centimes) Lalin Union 
 
 19.295 
 
 9H 
 
 £. Fes, Mks 
 
 G 
 
 Turkey 
 
 Lira (100 Piastres, 4,000 Paras) 
 
 4.39.66 
 
 18. OM 
 
 $ 
 
 G 
 
 United States 
 
 Dollar (100 Cents) U.S.A. 
 
 1.00.000 
 
 4. IH 
 
 £ $ 
 
 G 
 
 Uruguay 
 
 Peso (100 Centesimos) 
 
 1.03.42 
 
 4. 3 
 
 £S 
 
 G 
 
 Venezuela 
 
 Peso (Bolivar. 100 Centavos) Latin U . 
 
 19.295 
 
 9H 
 
 £ 
 
 G 
 
 West Ind. (Br.) {Gt. Brit.) 
 Antigua Bermuda 
 Bahamas Dominica 
 Barbadoes Grenada 
 St. Kitts Tobago 
 St. Larcia Trinidad 
 St. Vincent Jamaica 
 Turk's Island 
 
 Pound Sterling Stg. 
 
 4.86.666 
 
 1. 0. 
 
 Column 1: — Currency in which Drafts should be drawn. 
 
 In the absence of an account with a correspondent in the above countries 
 (or the mother country in the case of a colony) drafts may be issued on the coun- 
 tries named in the following currencies, which are specified in order of preference: 
 £ — pounds sterling on London, England. 
 $ — United States Dollars on New York. 
 Fes — Francs on Paris, France. 
 
 Mks — Marks (reichsmarks) on Berlin or Hamburg, Germany. 
 Mex. $ — Mexican Dollars (cover usually provided in New York). 
 
 Drafts so drawn should bear a phrase to the following effect, (if the paying 
 bank's exchange charge is to be met by the beneficiary) : — 
 
 Payable at the drawees' buying rate for demand drafts on London (Paris, etc., 
 as the case may be). 
 
 If a bank has no correspondent in a country this phrase should be omitted. 
 
 Column 2:— Monetary Standard (M.S.), Gold (G), Silver (S). 
 
 In certain countries (mostly in Asia and South America) a nominal gold or 
 silver standard exists, but there is no effective system of standard values, and 
 the value of coins is consequently of an uncertain and fluctuating value. 
 
 *The names af such countries are printed in italics. 
 
 In several of these countries the monetary system is in a state of transition 
 fromra silver to a gold standard. 
 
 In South American countries large quantities of paper money (generally 
 worth much less than the face value) are in circulation. 
 
 Column 3: — Country. 
 
 Gives the names of the principal countries of the world in alphabetical order. 
 If a colony or protectorate of any other country, the latter is given opposite in 
 brackets. 
 
 Column 4: — Monetary Units. 
 
 Gives the monetary unit of each country and the monetary union (if any) 
 to which it belongs. 
 
 1 :57 
 
TABLE VI. 
 
 Sixty-Fourths Expressed as Decimals 
 
 
 
 Plus 1/64 
 
 Plus 1/32 
 
 Plus 3/64 
 
 
 
 .015625 
 
 .03125 
 
 .046875 
 
 1/16 
 
 .0625 
 
 .078125 
 
 .09375 
 
 .109375 
 
 1/8 
 
 .125 
 
 . 140625 
 
 .15625 
 
 .171875 
 
 3/16 
 
 .1875 
 
 .203125 
 
 .21875 
 
 .234375 
 
 1/4 
 
 .25 
 
 . 265625 
 
 .28125 
 
 .296875 
 
 5/16 
 
 .3125 
 
 .328125 
 
 .34375 
 
 .359375 
 
 3/8 
 
 .375 
 
 .390625 
 
 .40625 
 
 .421875 
 
 7/16 
 
 .4375 
 
 .453125 
 
 .46875 
 
 .484375 
 
 1/2 
 
 .50 
 
 .515625 
 
 .53125 
 
 .546875 
 
 9/16 
 
 .5625 
 
 .578125 
 
 .59375 
 
 .609375 
 
 5/8 
 
 .625 
 
 . 640625 
 
 .65625 
 
 .671875 
 
 11/16 
 
 .6875 
 
 .703125 
 
 .71875 
 
 .734375 
 
 3/4 
 
 .75 
 
 .765625 
 
 .78125 
 
 .796875 
 
 13/16 
 
 .8125 
 
 .828125 
 
 .84375 
 
 .859375 
 
 7/8 
 
 .875 
 
 . 890625 
 
 .90625 
 
 .921875 
 
 15/16 
 
 .9375 
 
 .953125 
 
 .96875 
 
 .984375 
 
 The decimal etiuivalent of eighths and sixteenths should lie learned. The la=t 
 column can be read in three ways, thus .109375 is 7,64 or 1 16 plus 3 64 or 1,8 
 minus 1/64. 
 
 The first three lijiures of the decimal shown in black face type are sufficiently 
 cloee for ordinary calculation. 
 
 Move the decimal point two places to the left for fractional percentages. 
 
 138 
 
G 
 
 ^ 
 
 = O 5^ 
 
 H ° o 
 
 i-J +-> 
 
 ^ ex > 
 
 CO 
 
 c 
 o 
 
 ■t-< 
 
 u 
 (0 
 
 Vi 
 
 o 
 
 00 
 
 CO 
 
 CO 
 
 CO 
 
 
 CD 
 
 CD 
 CO 
 
 CO 
 
 CD 
 
 C 
 3 
 O 
 
 o >i:) o lo o 
 
 >0 t^ O (M lO 
 
 to O kO LO CO 
 t^ O to (M 00 
 
 O to O to 
 to t^ O <M 
 
 O to O to O 
 to t^ O (M to 
 
 to 
 
 (M 00 lO i-H t^ 
 
 1— 1 rH (M CO CO 
 
 CO O to CO O 
 Tti to to to CO 
 
 (M lO 00 to -— 1 
 CO CD CO t^ 00 
 
 t^ CO O CD (M 
 
 00 C^ O O rH 
 
 I— 1 >— ( 1— 1 
 
 00 o 
 
 T-H rH 
 
 t^ CO to CO <M 
 CO O t^ ^ ^ 
 
 C5 ^ 00 CO oo 
 
 i— I O i-H 00 oo 
 00 to 1— I ^^ <M 
 <M t^ CD iM <M 
 
 t^ to CD to CO 
 
 00 t^ to oi Ci 
 
 CD 00 -—I CO O 
 
 (M -— I O 00 t^ 
 CO CO O CO CO 
 tO O to O Tf 
 
 O CO rH t^ (M 
 1— I 1— I (M (M CO 
 
 00 CO 00 Ci CO 
 
 CO TfH Tti ^ to 
 
 ■rti CD O to tH 
 
 to to CO CO i>- 
 
 CD (N t^ (M 00 
 
 t^ 00 00 OS Ci 
 
 t^ (M O l:^ to 
 
 CO CD to CO <M 
 to O t^ ■* i— I 
 
 (M O CO l^ to 
 i— I O CD 00 Ol 
 00 to CO -— I CO 
 
 to c^ o t^ 
 
 t^ to CD to CO 
 00 t^ to (M Ci 
 
 to (N O t^ to 
 (M 1— I O 00 t^ 
 CD CO O CD CO 
 
 C5 Tt^ 00 CO 00 
 T— I T-H (M <M 
 
 (M t^ T— I (M to 
 
 CO CO ^ ^ '^l 
 
 CD OO T— I CO O 
 Tti -rfi to to CO 
 
 to O to C5 -* 
 CO t^ t^ t^ 00 
 
 (M 00 to rH t^ 
 
 1— I ^H C^ CO CO 
 
 00 t^ CO to Tf 
 
 CO O (M >0 T— I 
 'rt^ to C^I to (M 
 CO iM t^ rH O 
 
 (M to 00 to 1—1 
 CD (M CO r^ 00 
 
 O CO Oi 00 t^ 
 
 t^ CO o CO CQ 
 
 00 CI O O »H 
 CD to to ^ CO 
 
 I> rH to Gi CO 
 
 1—1 1—1 1—1 c^ 
 
 t^ ^ Ttl to t- 
 
 c^ CO CO CO CO 
 
 Ci O <M CD O 
 CO Tfi -# ^ to 
 
 'TtH 00 (N CO O 
 to to CO CO I>- 
 
 O to O to o 
 to t^ O (N to 
 (M CO to CD t^ 
 
 to O t^ to t^ 
 t^ O t^ Ol 1— I 
 
 00 O t^ 1— I ^ 
 
 O to O to 
 to O t^ O <M 
 (M to CO to CD 
 
 O to O to o 
 to t^ O (M LO 
 
 r^ 00 o ^ (M 
 
 CO Oi (M to 00 
 
 rH lo r^ 00 o 
 
 (M C^ (M (M CO 
 
 rH (N rf t^ O 
 
 CO CO CO CO '^ 
 
 CO CD O CO CO 
 
 "* r^ to to to 
 
 !>. 1— I to 00 05 
 
 00 CO t^ rH CO 
 
 CO O CO t^ o 
 
 CO O CO CO (M 
 
 O to CO Oi rH 
 
 'TfH t^ 00 O 00 
 
 t^ lO rH lO 00 
 
 CO r^ 00 (M CD 
 
 "* CO [^ rH T^ 
 
 C^ CO O CO CD 
 
 rH to O -^ OO 
 00 rH lO 00 rH 
 
 TtH t^ Oi 
 
 CD 00 O rH (M 
 rH rH C-l (M (M 
 
 CO ^ to oo o 
 
 (M C^ iM (M CO 
 
 <M to t^ O (M 
 
 CO CO CO CO -^ 
 
 to t^ O (M to 
 
 (M 00 «0 rH t^ 
 rH CO (N 00 CO 
 
 t^ O 00 (M 00 
 CO O 00 CO O 
 Ci to 00 o C^ 
 
 to t^ O C<4 
 
 <M to 00 to rH 
 
 CO C^ rH t^ CO 
 
 to t^ O (M to 
 
 t^ CO O CD (M 
 
 OO -^ O to rH 
 
 CO '^ CO t^ O 
 
 O <M CO TtH to 
 
 to CD t^ OO O 
 
 rH CO to CO 00 
 <N (N (M (M C<J 
 
 (M CO to CO t^ 
 CO rh <M O 00 
 lO CO rH O CD 
 
 00 O ^ rH rtt 
 
 CD to ^ CO O 
 '^ <M 03 O CO 
 
 C^ lO CO to CO 
 
 rH Ol Oi I^ to 
 00 »H to CO rH 
 
 t^ 00 O rH (M 
 CO rH O 00 CO 
 
 C5 l^ to (M o 
 
 O to O 'O o 
 
 rH rH C^ IM CO 
 
 to O '^ to 00 
 
 CO rt" -* -rfH r^ 
 
 * * * 
 
 O (M to O to 
 to to to CD CD 
 * 
 
 O to O to O 
 
 t^ r^ 00 00 o 
 
 CO 
 
 o 
 
 CO to 
 
 o o 
 
 (M 
 
 CO 
 
 o 
 
 o o 
 
 00 C5 
 
 00 
 
 TtH to 
 
 to 
 
 CO 
 
 C5 O 
 
 to CO 
 
 CO 
 
 to 
 
 r+l to 
 
 00 
 
 o 
 
 a o 
 
 (M CO 
 
 CO 
 
 00 
 
 rH (M CO CO '^ 
 
 to CO CD t^ t^ 
 
 t^ 00 00 o o 
 
 O rH (M CO 'TfH 
 rH 1 — 1 1— 1 1 — 1 1 — 1 
 
 •^ to 
 
 T-i rH 
 
 O O O O O 
 
 o o o o o 
 o o o o o 
 
 O O ^ O CO 
 0^*00 
 O O ^ O CO 
 
 o o o o o 
 o o o o o 
 o o o o o 
 
 o o o o o 
 o o o o o 
 o o o o o 
 
 O 3 
 
 3 3 
 3 3 
 
 lO CO 
 * 
 
 o 
 
 CJ 
 
 C 
 03 
 u 
 
 c 
 
 tn 
 
 C 
 
 O 
 O 
 
 'G 
 
 OJ 
 
 a 
 * 
 
 139 
 
-J 
 
 < 
 
 > :« 
 (J 
 
 u 
 
 V 
 
 s 
 
 s 
 
 o 
 
 U 
 
 C 
 CO 
 
 0) 
 
 ii 
 
 a 
 z 
 
 m 
 
 w 
 
 a 
 a 
 
 a 
 
 0} 
 
 u 
 be 
 
 (C 
 
 3 
 
 c 
 
 (0 
 
 -J 
 
 
 3 
 
 a 
 
 a 
 
 e 
 m 
 
 & 
 O 
 
 c 
 
 e 2 £; iS X 3"S 2 o>^-3 £!or, x=i^ $ = = «!- Cx3tiS52rty5 
 
 CO , 
 
 MHHti. 
 
 to 
 
 _c 
 
 s 
 
 - rt 
 
 *j o 
 •a ci n 
 
 >Ufc. C3 
 
 
 
 u E < 
 
 lU 
 
 CI >..S 
 
 V 
 
 > 
 ■ >. 
 
 • M 
 
 > c 
 >•■» JJ 
 
 
 • flj •fljSajCC "C • ^..^ >-.-'.■— •^^'-^^^^-^ ■ 
 
 ••■■■■• • > ^-222 § g c E o Sf= J'-giS'S ^"^■a = aj 
 
 -J2;Ex->S : :|^t;SEt^ti2t;>°^t|-S|x.5c«M 
 
 ■-'tx.fc[flMOZHHHHU.faMX<2HMHU.ffiHffiU.aaHQ 
 *- 
 
 _c 
 
 'u 
 
 •a 
 1-, 
 o 
 .•I 
 
 c 
 
 3111 
 
 *.i o 
 
 tSC/3T3 
 
 <aa 
 
 
 
 &0 
 
 E 
 &> 
 
 • i; 0) £ 
 
 
 • C 
 •T3 
 
 • O 
 
 E rt *-! 
 
 
 a 
 
 rt 2 
 
 -■ ■ ii 3 - 
 
 - Si c 2 > S.S > = oJ S «i c ^ > 5 a S 2? 5i E Si > o 
 
 ■3 <a 
 
 c a 
 
 V 
 
 •a 
 
 OQHHCut)}w>QQOQHUa.t«M>QQGH7:cUM72>Q^HQZSOCu 
 
 0) 
 - CI 11 I, • 
 
 o) u q "' 
 
 oj C 
 
 J— CIj =£c_i 
 C -ji fc ti •- H K 
 
 o o 13 
 
 O *j 
 
 J3 
 
 O 
 
 O 
 
 ZC3 00 
 
 ;■- EC'z; i. 
 
 "2 -a 
 
 St: 
 
 SJ.ii Ss S 5 S >. 
 
 ?\*^ ■/J <^(ii > I— f\i T, -^ /J r* _i mri^ 
 
 rt j« > 
 
 WHQ>>NN<2;HWHQ>>NN<ZHk]Q>>NNHZSQQ5S4o 
 
 c i; OJ >.£ £ rt i; o^ 
 
 
 +-» ; O 
 
 N T3 
 
 C3 S 
 ■i-> S C 
 
 O. ta Si 
 
 OQQ 
 
 C3 
 
 a 
 
 £S2 
 
 ' CJ C3 C 
 
 ee ; 
 
 e' s ■'; 
 
 3 O 2 
 
 kqh 
 
 2o 
 
 a! g M «j 
 
 3.t;- 
 
 C 3^3.5 
 
 <u 
 
 N ..sz; o 
 
 I- fl; <D GJ -taJ 
 
 O !S3 CO X CJ 
 
 O (U C3 P ■ -^ ■" f* f^J 1^1 
 
 a;a;2 E; 
 
 E ca rt CI t; 
 p c - - - 
 
 cS^e?i22>S- 
 
 ^ -^ u 3 .:: 
 
 •- ° S5-i? 
 
 §2 
 
 7]CZQCQHaaQQQQ>>HauwwOZcjSQc?:S<< 
 
 
 > : : 
 
 a; 
 ■a 
 
 o 
 
 <u 
 (n 
 
 M 
 m 
 
 CL, 
 
 o 
 
 o 
 
 ■3. J 
 
 •- s.y 
 
 . f 1 _^ _^ .n *-* ' 
 
 
 3 3 
 
 o rj O rt 'z; "*j ' 
 
 3 -C CJ 'vj o 
 
 ^ ^« w ^ f^ 
 
 CT ca rt = !a ii u 
 
 C3 
 
 ea 
 
 c 
 
 ,2 . .^ 
 ' .S D o — 
 
 ' *j w 3 
 
 bQHab'j0c)QCZQDaHa3xCQQ>>HDL»XMO20SO:^S<< 
 
 5 6 — 
 
 c _. 
 
 - ttj a 
 
 . ..22 3 
 
 o ta >T3 
 
 o V) O O 
 
 N > o o 
 
 ca o 
 a' ej ir, 
 ca.s j= 
 
 53 ca 
 c^ a, 
 
 o 
 
 O M 
 
 13 O 
 
 o ■ 
 
 ca r- 
 
 o o 
 
 u 
 
 v 
 
 > 
 
 3 
 
 c/: X O C 
 
 «! 
 
 it! C 
 
 ;S^ ej 
 
 So 3.S 
 
 0) <u 
 
 OCNNNNCC.bHo 
 
 - - - ii---~ a s C 
 
 cart 
 
 ca 
 
 OJ *j -3 CJ OJ CJ 
 
 t-. 5 <u = .3 c 
 
 o 
 5QHUUc«K6ZQOQHuaQQQQ>>HUUwcflOZu2QwS<< 
 
 ; ca ca 
 
 ■ *-' J3 
 
 2 o 
 
 K VI U) 
 
 c'>.2.S 
 
 o „-=-a 
 oJS ■ • 
 
 <« 
 
 ca 
 
 CO 
 
 ca 
 
 o 
 O 
 
 C > C <u 
 
 (3nQ> 
 
 
 ;<:zn 
 
 • C r^ ^ C r* ^ r^ . • 'M. ■ A^ ' • • 
 
 •o-sj^o-ss^nKc -^.y-^.s? 3 -s 3 ii g : a t; 
 
 ^.2 N>a Jj Nile C 3 N n.:J N 1, N ^.g ,;J — g 
 
 i •o5t-cr,£i£3ca-Shc-Sj223C3uiy£ 
 iMNO>fcW[/3<ZNMO>fcMi73<ZaHH>S 
 
 o bo • 
 j^ N ca 
 
 ca ca 
 ZZ 
 
 1 ■ CA I 
 
 - O 1-. I- u, 
 
 .a Si--- 
 
 ,N 
 
 ^■^2 
 
 o J! S 
 iw ir 1- 3 
 C Sj= o 
 
 OHHtL. 
 
 C*-» • c>_!i.2*.'Cucc+j4-»c:c:L)t>»u*.^C*^*-*'3^ .j^ 
 Sj=^e>-3t5a;«Si: Jigg u5>.>.pj2 S 3 S >,o 
 .^.:i >.£f;S gi; is2 g£.^ S-£f| & ^2 S5.2 t^^S 3 S&o 
 U.cA!c/iWZHaHHfcU.c«(riaZHHHt.:i.xxWZ!I!HQ? 
 
 iCC0t-00OO—ilMMTt<il3t0t^00tSO — 000000000 
 .-(.-irt.-(r-i.-(.-irt.-ir-l(NC<lC0tic3Ot^Xc:5OO 
 
 ,-.0 
 
 140 
 
 
TABLE IX. 
 Moneys in Acftual Use 
 
 Designation 
 
 *Abassi 
 
 *Abassi 
 
 Alexander 
 
 Alfonsino 
 
 Anna (s) 
 
 Att 
 
 Balboa (s) 
 
 Banu (i) 
 
 Batz (pi. batzen). . 
 
 *Belion 
 
 *Besa (e) 
 
 *Besa (e) 
 
 Bit 
 
 Bolivar (es) 
 
 Boliviano (s) 
 
 * British dollar 
 
 *Candareen 
 
 *Cash 
 
 Where Used 
 
 Afghanistan 
 
 Persia 
 
 Bulgaria 
 
 Spain 
 
 India 
 
 Siam 
 
 Panama 
 
 Rou mania 
 
 Switzerland 
 
 Morocco 
 
 Abyssinia 
 
 Eritrea 
 
 Danish West Indies. 
 
 Venezuela 
 
 Bolivia 
 
 Used in Orient 
 
 China 
 
 China 
 
 Equivalent 
 
 Jg of a Rupee. . 
 1/5 of a Kran. . 
 
 20 Leva 
 
 25 Pesetas 
 
 }/i of Rupee.. . . 
 1/64 of Tical.. . 
 100 Centesimos. 
 1/100 of Leu... 
 10 Centimes. . . 
 
 1/20 Rial 
 
 1/100 Talari. . . 
 1/100 Tallero. . 
 1/100 of Franc. 
 100 centimos. . . 
 100 Centavos. . 
 
 Value 
 
 $3 . 85.^^9 
 4.82.375 
 . 02028 
 
 *Cash 
 Cent 
 Cent 
 
 (s). 
 
 *Cent (s). 
 
 *Cent (s). 
 
 *Cent (s) , 
 
 Cent (s). 
 
 Cent 
 Cent 
 
 (s). 
 (s). 
 
 Centavo 
 Centavo 
 Centavo 
 Centavo 
 
 (s), 
 (s) 
 (s) 
 (s) 
 
 Centavo (s) 
 
 (s). 
 
 (s). 
 
 (s). 
 
 (s). 
 
 (s). 
 
 (s). 
 
 (s), 
 
 (s) 
 
 (s) 
 
 (s) 
 
 Hongkong. . . . 
 Newfoundland 
 United States, Canada, 
 Cuba, Hawaii, Porto 
 Rico, British West In- 
 dies, British Guiana, Br. 
 Honduras, Dominican 
 
 Republic, Liberia 
 
 Hongkong and China. . . . 
 
 China 
 
 China • 
 
 Straits Settlements and 
 Federated Malay States 
 
 Netherlands 
 
 Ceylon, British East Afri- 
 ca, Zanzibar, Somali- 
 land (Italian) 
 
 Portugal 
 
 Nicaragua (new) 
 
 Philippines 
 
 Mexico 
 
 Peru 
 
 Ecuador 
 
 Argentina 
 
 Argentina 
 
 Honduras and Salvador. . 
 
 Bolivia 
 
 Chile 
 
 Chile 
 
 Guatemala 
 
 Nicaragua (old) 
 
 Paraguay 
 
 Cuba 
 
 LTruguay 
 
 Panama 
 
 Italy 
 
 1/100 of Tael 
 
 1220 Cash = l Haikwan 
 
 Tael 
 
 1/1000 of a Dollar 
 
 1/100 of a Dollar 
 
 1.00 
 
 0.00193 
 
 0.0193 
 
 0.01989 
 
 0.00415 
 
 0.00398 
 
 0.00193 
 
 0.19295 
 
 0.38932 
 
 0.42898 
 
 1/100 of Dollar 
 
 1/100 of Dollar 
 
 1/100 of Tael (kuping). 
 1/100 of Tael(Haikwan) 
 
 0.01014 
 
 1/100 of Dollar.. 
 1/100 of Guilder. 
 
 Centavo 
 
 Centavo 
 
 Centavo 
 *Centavo 
 
 Centavo 
 **Centavo 
 
 Centavo 
 **Centavo 
 **Centavo 
 **Centavo 
 
 Centen 
 
 Centesimo (s) 
 
 Centesimo (s) 
 
 Centesimo (i) 
 
 Centimo (s) Costa Rica , . . 
 
 *Silver basis, therefore values fluctuate, above values calculated on basis ot 
 
 25.09d. per standard ounce (.925 fine) or 55 cents per ounce hne. 
 **Paper basis, values are approximate only. 
 
 141 
 
 1/100 of Rupee... 
 1/100 of Escudo. 
 1/100 of Cordoba 
 
 1/100 of Peso 
 
 1/100 of Peso 
 
 1/100 of Sol 
 
 1/100 of Sucre 
 
 1/100 of Peso (gold). . . 
 1/100 of Peso (paper). . 
 
 1/100 of Peso 
 
 1/100 of Boliviano 
 
 1/100 of Peso (paper). . 
 1/100 of Peso (gold). . . 
 1/100 of Peso (paper). . 
 1/100 of Peso (paper). . 
 1/100 of Peso (paper). . 
 
 25 Pesetas 
 
 1/100 of Peso 
 
 1/100 of Balboa 
 
 1/100 of Lira 
 
 1/100 of Colon 
 
 0. 
 
 01 
 
 0. 
 
 00429 
 
 0. 
 
 00646 
 
 0. 
 
 00663 
 
 0. 
 
 00567 
 
 0. 
 
 00402 
 
 0. 
 
 00324 
 
 
 
 01080 
 
 
 
 01 
 
 
 
 00500 
 
 
 
 00498 
 
 
 
 00487 
 
 
 
 00487 
 
 
 
 00965 
 
 
 
 00424 
 
 
 
 00398 
 
 
 
 .00389 
 
 
 
 .00200 
 
 
 
 . 00365 
 
 
 
 . 00050 
 
 
 
 . 00060 
 
 
 
 . 00070 
 
 4 
 
 .82375 
 
 
 
 .01034 
 
 
 
 .01 
 
 
 
 .00193 
 
 
 
 .00465 
 
Moneys in Actual Use — Continued 
 
 Designation 
 
 Centime (s) 
 Centimo (s) 
 Centime (s) . 
 
 **Centime (s) . 
 *Centimc (s) . 
 
 Colon (cs) . . 
 
 Condor. . . . 
 
 Condor. . . . 
 
 Condor .... 
 
 Conto 
 
 Conto 
 
 Cordoba . . . 
 
 Coroa 
 
 Crore 
 
 Crown 
 
 Crown 
 
 Dime 
 
 Dinar (s). . . 
 *Dinar (s).. . 
 
 Dinero 
 
 *Dirheni .... 
 *Dollar 
 
 Dollar 
 
 Dollar 
 
 ♦Dollar 
 
 Dollar. . . 
 Dollar. . . 
 Dollar (s) 
 Dollar (s) 
 
 Dollar (s) , 
 ^Dollar (s) 
 
 Doubloon (gold) 
 
 Drachma (i) . . . . 
 
 Ducat 
 
 Ducat 
 
 Eagle 
 
 Escudo (gold).. . 
 
 Escudo (s) 
 
 Farthing 
 
 .Filler 
 
 . Florin 
 
 . Florin 
 
 . Florin (s) 
 
 . Franc (s) 
 
 **Ciourde 
 
 Gourde (gold) 
 
 *Cjuerchc 
 
 Guilder 
 
 Where Used 
 
 Equivalent 
 
 Spain 
 
 Venezuela 
 
 France, Belgium, Monaco, 
 
 and Switzerland 
 
 Haiti 
 
 Indo-China 
 
 Costa Rica 
 
 Chile 
 
 Colombia 
 
 Ecuador 
 
 Brazil 
 
 Portugal 
 
 Nicaragua (new) 
 
 Portugal 
 
 India 
 
 United Kingdom 
 
 see Krona, 
 
 United States 
 
 Servia 
 
 Persia 
 
 Peru 
 
 Morocco 
 
 Abyssinia 
 
 Philippines 
 
 Argentina 
 
 China 
 
 Haiti 
 
 Uruguay 
 
 Newfoundland 
 
 United States, Hawaii, 
 Porto Rico, Canada, 
 Cuba, British West In- 
 dies, British Guiana, Br. 
 Honduras, Dominican 
 Republic, Liberia 
 
 Straits Settlements and 
 
 Federated Malay States 
 
 China, Hongkong, British 
 Labwan 
 
 Chile 
 
 Greece 
 
 Netherlands 
 
 Austria 
 
 United States 
 
 Chile 
 
 Portugal 
 
 United Kingdom 
 
 Hungary 
 
 Austria Hungary 
 
 Ignited Kingdom 
 
 Netherlands 
 
 France, Belgium, Monaco, 
 and Switzerland 
 
 Haiti 
 
 Haiti 
 
 Abyssinia 
 
 Austria Hungary 
 
 U'lOO of Peseta. 
 1/100 of Bolivar. 
 
 1/100 of Franc 
 
 1/100 of Gourde 
 
 1/100 of Piastre 
 
 100 Centimes 
 
 20 Pesos 
 
 10 Pesos 
 
 10 Sucres 
 
 1000 Milrcis 
 
 1001) Milreis 
 
 100 Centavos 
 
 10 Milreis •. . . . 
 
 100 lacs of rupees 
 
 5 Shillings 
 
 Krone, Coroa 
 
 10 Cents 
 
 100 Paras 
 
 1/50 of Shahi 
 
 10 Centavos 
 
 1/10 Hassani Dollar. . , 
 16 Guerches 1 Talari. . . 
 
 100 Centavos 
 
 1 Peso (gold) 
 
 100 cents (72% of Haik- 
 
 wan Tael) 
 
 1 Gourde (gold) 
 
 100 Centesimos 
 
 100 cents 
 
 100 cents. 
 100 cents. 
 
 100 cents 
 
 10 Pesos 
 
 100 Lepta 
 
 5.70 Gulden. . . . 
 11.29 Kronen . . . 
 
 10 Dollars 
 
 5 Pesos 
 
 100 Centavos. . . 
 34 of a penny. . . 
 1/100 of Korona. 
 
 2 Kronen 
 
 2 Siiiliings 
 
 100 cents 
 
 100 Centimes. . 
 100 Centimes. . 
 100 Centimes. . 
 1/16 of a talari. 
 1 Florin 
 
 Value 
 
 $0. 
 0. 
 
 00193 
 00193 
 
 .00193 
 .00250 
 . 00430 
 . 46536 
 . 2995 
 
 0. 
 0. 
 0. 
 0. 
 7 
 10. 
 4 . 86656 
 
 1. 
 10. 
 
 00 
 8046 
 
 1.21666 
 
 
 .10 
 
 
 
 .19295 
 
 
 
 .0007 
 
 
 .0487 
 
 
 . 0466 
 
 
 .46 
 
 
 .50 
 
 
 .965 
 
 
 .47784 
 
 
 .965 
 
 1 
 
 .03424 
 
 1 
 
 .01387 
 
 1,00 
 0.56776 
 
 
 
 3. 
 
 
 
 2. 
 2. 
 
 10^ 
 1, 
 1. 
 
 o' 
 
 42898 
 
 6497 
 
 19295 
 
 28267 
 
 28792 
 
 8248 
 
 08056 
 
 00505 
 
 00203 
 
 4052 
 
 4866 
 
 40196 
 
 19295 
 25000 
 965 
 
 .4052 
 
 *Silver basis, therefore values fluctuate, above values calculated on basis of 
 25.09d. per standard ounce (.925 fine) or 55 cents per ounce fine. 
 **Paper basis, values are appro.ximate only. 
 
 142 
 
Moneys in Actual Use— Continued 
 
 Designation 
 
 Guilden (Iden) . . . 
 
 Haikwan tael 
 
 *Hassani dollar. . . . 
 
 Half Crown 
 
 Heller 
 
 Heller 
 
 Imperial Kruetzer. 
 
 Kopeck (s) 
 
 Korona 
 
 *Kran (s) 
 
 Krona (or) 
 
 Krone (er) 
 
 Krone (n) 
 
 Krone (n) 
 
 Lac or Lakh 
 
 Lepton (pta) .... 
 
 Leu (i) 
 
 Lev (a) 
 
 Libra (s) 
 
 Lira 
 
 Lira (e) 
 
 Lira 
 
 Louis 
 
 Levant dollar. . . . 
 
 *Mace 
 
 *Maria Theresa 
 Thaler 
 
 Mark 
 
 Markka (a) 
 
 Medjidie (silver). 
 
 Medjidie (gold) . . 
 
 Menelik dollar. . . 
 
 Mill 
 
 Millieme 
 
 Milreis 
 
 Milreis 
 
 Milreis 
 
 Mocha dollar. . . 
 
 Napoleon 
 
 Ochr-el-guerche. 
 Ore 
 
 Para (s).. . . 
 Para (s). . . . 
 Para (s).. . . 
 Para (s). . . . 
 Penni (a).. . 
 Penny (ies). 
 
 Perper (a). 
 Peseta (s) . 
 Peso (s). . . 
 Peso (s). . . 
 Peso (s) . . . 
 **Peso (s) . . . 
 Peso (s). . . 
 
 Where Used 
 
 Equivalent 
 
 Netherlands 
 
 China 
 
 Morocco 
 
 United Kingdom 
 
 Austria 
 
 German East Africa. . . 
 
 Russia 
 
 Russia 
 
 Hungary 
 
 Persia 
 
 Sweden 
 
 Denmark and Norway. 
 
 Austria 
 
 Germany 
 
 India 
 
 Greece 
 
 Roumania 
 
 Bulgaria 
 
 Peru 
 
 Egypt 
 
 Italy 
 
 Turkey 
 
 France 
 
 Austria 
 
 China 
 
 100 Cents 
 
 l}/s oz. avoir, of silver. 
 
 1 rial 
 
 2 shillings and sixpence 
 1/100 of Krone.. . . 
 
 1/100 of Rupee 
 
 15 Roubles 
 
 1/100 of Rouble.. . 
 
 100 Filler 
 
 20 Shahis 
 
 100 Ore 
 
 100 Ore 
 
 100 Heller 
 
 10 Marks 
 
 100,000 Rupees.. . 
 1/100 of Drachma 
 
 100 Bani 
 
 100 Stotinki 
 
 10 Soles 
 
 Value 
 
 $0 
 
 40196 
 .66367 
 . 4663 
 . 60833 
 . 00203 
 0.00317 
 7. 7 1839 
 0.00515 
 . 20263 
 0.07328 
 0.26799 
 . 26799 
 . 20263 
 2 . 38209 
 
 1 Egyptian Pound. 
 
 100 Centesimi 
 1 Turkish Pound 
 
 20 Francs 1 3 
 
 Maria Theresa Thaler 
 1/10 Tael 
 
 Northeast Coast Africa 
 
 Germany 
 
 Finland 
 
 Turkey 
 
 Turkey. . 
 
 Abyssinia 
 
 United States 
 
 Egypt 
 
 Brazil 
 
 Brazil 
 
 Portugal (old) 
 
 Arabia 
 
 France 
 
 Egypt 
 
 Denmark, Sweden and 
 
 Norway 
 
 Servia 
 
 Montenegro 
 
 Egypt 
 
 Turkey 
 
 Finland 
 
 United Kingdom, Austra- 
 lia, New Zealand, and 
 majority of British Col- 
 onies 
 
 Montenegro 
 
 Spain 
 
 Argentina (gold) 
 
 Argentina (paper 
 
 Uruguay 
 
 Chile 
 
 Chile 
 
 100 Cents 
 
 100 Pfennige 
 
 100 Pennia 
 
 20 Piastres 
 
 100 Piastres 
 
 Maria Theresa Thaler. 
 
 1/10 of a cent 
 
 1/10 Piastre 
 
 1000 Reis (gold) 
 
 1000 Reis (paper) 
 
 1000 Reis 
 
 Piastre 
 
 20 Frances 
 
 1/10 Piaster 
 
 00193 
 19295 
 19295 
 86656 
 94307 
 19295 
 4 . 39642 
 859 
 41362 
 065 
 
 0.41362 
 0.23821 
 0.19295 
 .86928 
 4 . 39642 
 
 .001 
 0.00494 
 0.54615 
 0.32444 
 1.08046 
 
 .405 
 3.859 
 
 1/100 of Krone (a) 
 
 1/100 of Dinar 
 
 1/100 of Perper. . . 
 14: of Millieme . . . . 
 1/40 of Piastre. . . . 
 1/100 of Markka. . 
 
 1/12 of Shilling 
 
 100 Paras 
 
 100 Centimos 
 
 100 Centavos 
 
 100 Centavos 
 
 100 Centesimos 
 
 100 Centavos (paper) . 
 100 Centavos (gold)... 
 
 0.00268 
 0.00193 
 0.00203 
 0.00123 
 0.00109 
 0.00193 
 
 0.02028 
 . 20263 
 . 19295 
 0.96475 
 0.42449 
 1.03424 
 0.20 
 0.365 
 
 *Silver basis, therefore values fluctuate, above v 
 25.09d. per standard ounce (.925 fine) or 55 cents per ounce fine. 
 **Paper basis, values are approximate only. 
 
 143 
 
 -alues calculated on basis of 
 
Moneys in Actual Use — Ointinued 
 
 Designation 
 
 **Peso (s). 
 **Peso (s). 
 **Pcso (s). 
 **Peso (s). 
 *Peso (s). 
 Peso (s) . 
 
 Peso (s) 
 
 Peso (s) 
 
 Peso (Spanish 
 
 gold) 
 
 Pfennig (e) 
 
 Piastre (s) 
 
 Piastre (s) 
 
 *Piastre (s) 
 
 Pice (s) 
 
 Pie (s) 
 
 Pound (Sterling) . 
 
 Pound (Egyptian). 
 Pound (Turkish) . . 
 Pound Peruvian. . . 
 
 Reichsmark 
 
 Real (Reis) 
 
 Real (Reis) 
 
 Real (Reis) 
 
 *Rial 
 
 Rin 
 
 Rouble 
 
 Rupee 
 
 Rupee (s) 
 
 Where Used 
 
 Equivalent 
 
 Colombia 100 Centavos (paper) . . 
 
 Guatemala 100 Centavos (paper) . . 
 
 Nicaragua (old) 'lOO Centavos (paper) . . 
 
 Paraguay 100 Centavos (paper) . . 
 
 Honduras and Salvador. . 100 Centavos 
 
 Mexico j 100 Centavos 
 
 Philippines 1 100 Centavos 
 
 Panama (old) Half- Balboa 100 Centavos 
 
 Cuba 
 
 Germany. . ( 
 
 Egypt 
 
 Turkey 
 
 Indo-China 
 
 India 
 
 India 
 
 United Kingdom, Austra- 
 lia, New Zealand, and 
 other British Colonies. . 
 
 Egypt - 
 
 Turkey 
 
 Peru 
 
 Rupee (s) 
 
 Rupee (s) 
 
 Satang (s) 
 
 Sen 
 
 *Shahi (s) 
 
 Shilling (s) 
 
 Sol (es) 
 
 Soldo (i) 
 
 Sou 
 
 Sovereign , 
 
 Stiver 
 
 Stotinka (i) 
 
 Sucre (s) 
 
 *Tael Haikvvan . . . 
 *Tacl ( Kuping) . . . 
 *Tael (Haikwan). 
 
 *Talari 
 
 ♦Tallero (i) 
 
 *Thaler (Maria 
 Ther), 
 
 Portugal 
 
 Brazil 
 
 Brazil 
 
 Morocco 
 
 Japan 
 
 Russia 
 
 Afghanistan 
 
 Ceylon, British East Af- 
 rica, Zanzibar, Italian 
 Somaliland 
 
 India 
 
 German East Africa 
 
 Siam 
 
 Japan 
 
 Persia 
 
 United Kingdom, etc.. . . 
 
 Peru 
 
 Italy 
 
 France 
 
 United Kingdom 
 
 Netherlands. 
 
 Bulgaria 
 
 Ecuador 
 
 China 
 
 China 
 
 China 
 
 Abyssinia 
 
 Eritrea 
 
 100 Centavos 
 
 1/100 of Mark 
 
 1/100 of Eg. Pound. 
 1/100 of T. Pound.. 
 
 100 Centimes 
 
 }4r Anna 
 
 }/i Pice or 1/12 Anna.. 
 
 20 Shillings 
 
 100 Piastres 
 
 100 Piastres 
 
 100 Centavos 
 
 100 Pfennige 
 
 1/1000 of Milreis 
 
 1/1000 of Milreis (gold) 
 1/1000 of Milreis(paper) 
 
 20 Belions 
 
 1/10 of Sen 
 
 100 Kopecks 
 
 12 Shahis — 72 pice. . . . 
 
 Tical iSia 
 
 Northeast Coast of Africa 
 
 m. 
 
 Venezolano 
 
 Yen 
 
 *Yuan 
 
 Venezuela 
 
 Japan. 
 
 China (Chinese dollar). . 
 
 100 Cents 
 
 16 Annas 
 
 100 Heller 
 
 1/100 Tical 
 
 1/100 Yen 
 
 1/20 Kran 
 
 1/20 of Pound 
 
 1/10 of Libra 
 
 5 Centesimo 
 
 5 Centimes ; . . . . 
 
 20 Shillings 
 
 5 Cents 
 
 1/100 of Lev 
 
 100 Centavos 
 
 l}4 oz. avoir, of silver. 
 
 100 Cents 
 
 100 Cents 
 
 100 Bese 
 
 100 Bese 
 
 Value 
 
 100 Cents. 
 100 Satang. 
 5 Bolivars . 
 100 Sen. . . 
 100 Cents. . 
 
 $0.01 
 0.05 
 0.06 
 0.07 
 0.39786 
 0.49846 
 0.50 
 0.50 
 
 . 96475 
 . 0023S 
 0.04943 
 . 04396 
 . 4296S 
 . 00507 
 0.00169 
 
 4 . S6656 
 4 . 94307 
 
 4 . 39642" 
 4 . 86656 
 
 .23821 
 0.00108 
 . 00054 
 . 00032 
 0.39786 
 . 00049 
 0.51456 
 
 .16216 
 
 . 32444 
 . 32444 
 0.31761 
 0.00371 
 . 0049S 
 . 0036() 
 . 24333 
 . 48666 
 . 00964 
 . 009(i4 
 4 . 86656 
 . 02009 
 0.00193 
 . 48666 
 . 66367 
 0.64659 
 0.66367 
 0.41452 
 0.39786 
 
 0.41362 
 0.37085 
 
 .965 
 0.49846 
 0.42878 
 
 *Silver basis, therefore values fluctuate, above values calculated on basis of 
 25.09d. per standard ounce (.925 fine) or 55 cents per ounce fine. 
 **Paper basis, values are approximate only. 
 
 144 
 
TABLE X. 
 Symbols or Arbitrary Signs Useful in Business 
 
 @ (1) at, as 20 lbs. @ $1. 
 
 (2) to, as $4.85 @ 4.853^, 
 
 o/oo per mille, 
 
 % per cent, 
 
 c/o care of, 
 
 ^ paragraph, per, 
 
 ^ number, 
 
 = equal to, 
 
 > is greater than, 
 
 <C is less than, 
 
 • '• is equal to (used only between ratios), . 
 
 ' to; e.g., a:b : : c:d (the ratio of a to b equals the 
 ratio of c to d), 
 
 + plus, added to,fV'^'.^"P^^'^^;^'\**''t>.TSt'St 
 ^ . < decimal indicates that it 18 
 
 — minus, less, ( only "approximately j correct. 
 
 X multiplied by, 
 
 -^ divided by, 
 
 therefore, 
 .... and so on, 
 |/ square root of, 
 
 f/ cube root of, 
 
 because, 
 $ $ dollars, 
 ^ cents, 
 
 /\ shows where something has been omitted and 
 
 afterwards interlined, 
 " ditto, the same, 
 
 V check mark, 
 
 y/' double check mark. 
 
 145 
 
TABLE XI. 
 
 Money Symbols 
 
 $ dollar, milreis, peso. 
 
 $c/l paper peso in Argentina, c, 1 meaning curso 
 
 legal (legal tender). 
 $M/C paper peso in Chile, m/c meaning moneda 
 
 corriente (current money). 
 $m/n paper peso in Argentina, m n meaning moneda 
 
 nacional (national money). 
 $oro gold peso in Chile. 
 
 $o/s gold peso in Argentina, o/s meaning oro 
 
 sellado (coined gold) 
 S$ or SS$ dollar in Straits Settlements. 
 
 £ pound sterling in the British Empire. 
 
 £E or LE pound in Egypt. 
 
 LP or Lp pound in Peru. 
 
 £T or LT pound in Turke>". 
 
 / shillings in the British Empire, 10/6= and'gpe^ee. 
 
 B. balboa in Panama. boliviano in Bolivia. 
 
 B. or Bol. bolivar in Venezuela. 
 
 c. cent in the Ihiited States and Canada. 
 
 c. centavo. centime. 
 D. dinar in Servia. 
 
 d. pence in the British Empire. 
 Dr. drachman in Greece. 
 
 f. or fl. florin. 
 
 fr. franc. 
 
 K. krans in Persia. 
 
 Kr. krona or krone in Austria, Hungary, 
 
 Denmark, Norway and Sweden. 
 
 L. lira. 
 
 M. or Mk. mark. 
 
 P. peso. 
 
 Pi. or pias piaster. 
 
 Ptas. pesetas in Spain. 
 
 R. or Ro. ruble. 
 
 R., Re. or Rs. rupee or rupees in India. 
 
 Rs. reis in Brazil or Portugal. 
 
 s. or sh. shillings in the British Empire. 
 
 S. Sucre in Ecuador. 
 
 Tls. taels in China. 
 
 *In expressing sums in milreis the $ is used practically as a period, thus 
 10 milrc-isan 225 reis is written 100$225. 
 
 HO 
 
GLOSSARY OF 
 FINANCIAL TERMS 
 
 A 
 
 a/c account, 
 
 A/C account current, 
 
 acct account, 
 
 a.d after date, 
 
 agt agent, 
 
 amt amount, 
 
 Apr April, 
 
 A/s account sale, 
 
 A/S agreement of sale, 
 
 atty attorney, 
 
 Aug August, 
 
 (« for, at or to. 
 
 Abbreviations. — The abbreviations generally used in exchange and 
 commercial operations will be found at the head of each alpha- 
 betical division in this glossary. 
 
 Abrasion. — The loss of weight which coins undergo in passing from 
 hand to hand or from being brought into contact with each 
 other. In the case of transatlantic shipments of gold coin, 
 the loss by abrasion is serious, amounting to 25 or 30 cents 
 per $1,000. For this reason, gold bars are preferred for ship- 
 ment as the loss is negligible. (See Mint Remedy.) 
 
 Abstract of Title. — An outline of evidence of the ownership of any- 
 thing. A document containing a sufficient summary of the 
 title deeds, etc., which show the nature of a person's rights to 
 a certain property, together with any charges or circumstances 
 in any wise affecting it. A purchaser or mortgagee can readily 
 deduce a title to the property under consideration. The first 
 deed referred to on the abstract is known as the Root of Title. 
 
 Acceptance. — (1) The act by which a person engages to pay a bill 
 of exchange drawn upon him. (2) The bill after it has been 
 accepted. (See Sections 35-39 Bills of Exchange Act.) 
 
148 Glossary of Financial Terms 
 
 Acceptance for Honour. — The acceptance by a person, not other- 
 wise liable, of a 1)111 which has been refused by the drawee. 
 The purpose of such an acceptance is to sa\e the honour or 
 credit of a party liable thereon, who is expected to protect or 
 reimburse the acceptor for honour. (See In^Case of Need.) 
 (Section 147-155 BilU of FLxchange Act.) 
 
 Accepted Cheque. — (See Certified Cheque.) 
 
 Acceptilation. — The acquittance of a debt by a creditor 'without 
 recei\ing payment. 
 
 Acceptor. — The person, who accepts a bill of exchange drawn upon 
 him. Until the bill is accepted he is referred to as the drawee. 
 There is no liability attached to the drawee until he has signed 
 the bill and become the acceptor. 
 
 Accommodation Bill. — A bill of this kind is one to which a person 
 has put his name either as drawer, acceptor or endorser without 
 receiving any benefit from the paper. An accommodation bill 
 or note is discharged when it is paid by the person who is the 
 debtor in fact, though not in form. (Section 55, B.E.A.) 
 
 Accommodation Endorser. — One who endorses a negotiable instru- 
 ment without consideration, in order that another may raise 
 money on it. 
 
 Account. — A statement of one or more items relating to the same 
 person or thing, recorded under an appropriate heading. 
 
 Account Current. — A detailed statement showing the condition of 
 a current or running account at a certain date. 
 
 Account Payee. — These words are sometimes written across the face 
 of an English cheque and signify that the amount is to be 
 credited to the account of the payee. The words have no legal 
 effect and the negotiability of a cheque is in no way limited 
 by them. , 
 
 Account Sales. — A statement in detail by a commission merchant 
 to his client showing sales made by him as consignee for his 
 client, expenses and other charges against same, and net 
 proceeds. 
 
 Account Stated. — An account showing a balance, which has been 
 agreed upon between the parties thereto. 
 
Glossary of Financial Terms 149 
 
 Accrued. — Accumulated; as rent or interest earned but unpaid and not 
 necessarily due for payment. Thus, if rent is $50.00 per 
 month, $25.00 would be accrued at the middle of month. 
 
 Act of God. — A term used in bills of lading and charter parties, which 
 signifies some unforeseen accident produced by a physical 
 cause which is irresistible. No person is legally liable for any 
 loss arising through an Act of God. 
 
 Actual Rates. — The exact rates at which foreign exchange is sold 
 in large amounts between bankers and brokers. (See Posted 
 Rates.) 
 
 Administrator. — One who is appointed by the court to take charge 
 of the property or estate of a person, who died without making 
 a will. (See Executor.) 
 
 Ad Referendum. — This is a Latin phrase signifying "to be further 
 considered." In the case of contracts in connection with which 
 this term is used it would indicate that while the substance in 
 general has been agreed upon, there arc some details which re- 
 quire further consideration. 
 
 Ad Valorem. — A Latin phrase signifying according to value. Ad 
 valorem duty is a percentage on the value of the goods and not 
 on their weight or quantity. The British stamp tax on bills 
 and notes is ad valorem; namely, 1/- per £100. 
 
 Advice. — An advice is generally sent from one banker to another, 
 giving the latter the particulars of drafts drawn or letters of 
 credit issued on him. This document prevents mistakes and 
 detects forgeries, for when bills are presented for acceptance 
 or payment, they may be refused for want of the advice. 
 
 Affidavit. — A declaration in writing and made under oath. 
 
 After Date. — A phrase used in notes and drafts signifying after the 
 date of the bill or note. 
 
 After Sight. — A phrase used on bills of exchange, meaning after 
 having been presented to the drawee for acceptance. The 
 acceptor must insert the date of his acceptance upon an "after 
 sight" bill, so as to establish the date of its maturity. (See At 
 Sight.) 
 
 Agenda. — A list of the business to be transacted or discussed at a 
 certain meeting. 
 
150 Glossary of Financial Terms 
 
 Agent. — One employed by another to act for him. (See Attorney.) 
 
 Agio. — The premium or difference between the value of the metallic 
 and of the paper currency in a country or between the metallic 
 moneys of different countries (from the Italian ai^'^io, exchange). 
 
 Alienate. -To con\e\- the title to proi)erty. 
 
 Allocate. -To allot or assign a thing to a person, (icneralh' used in 
 reference to the allotment of shares in a company. 
 
 Allonge. — A piece of paper attached to a bill of exchange to receive 
 endorsements for which the original does not afford space. As 
 a matter of precaution the first endorsement on the allonge 
 should commence on the bill itself, and end on the allonge 
 (from the French allonger, to lengthen). 
 
 Allowance. — A deduction, an abatement. Thus, an allowance may be 
 deducted from the weight of goods to cover packages, etc. or 
 from the gross value to cover the value of overcharges or in- 
 ferior goods. 
 
 Alloy. — Gold and silver coins are an alloy of gold and copper and of 
 silver and copper respectively, the baser metal being 
 necessary to harden the coins, thus reducing the abrasion to 
 a minimum. English gold is 11/12 pure gold and 1/12 copper. 
 Canadian and United States gold is 9/10 pure gold and 1/10 
 copper. In a general sense, alloy means any inferior metal 
 mixed with one of greater value. 
 
 All Rights Reserved. -A notice put h\- the author upon his books, 
 to indicate that the copyright has been reserved and that 
 prosecution will follow infringement by others. 
 
 Alteration. — A change in the words or figures of a written instrument 
 after it has been executed and delivered. A material altera- 
 tion is one that affects the validity of a note or document and 
 renders it inoperatixe. (Sections 145, 146, B.E.A.). 
 
 Amortize. — To extinguish a loan by means of a sinking fund (amorti- 
 zation). 
 
 Ancillary. — Subordinate; for instance, an ancillary receixer is an 
 assistant receiver. 
 
 Annuity. — A sum ])aid annually for a certain number of years or in 
 perpetuity. Perpetual annuities are thos'e which are paid 
 
' Glossary of Financial Terms 151 
 
 periodically for an indefinite number of years. Annuities For 
 Fixed Terms are those payable for a stated number of years. 
 Life annuities are those which are payable during the life 
 time of the annuitant. Deferred annuities are annuities 
 payable from a stated future date until death of annuitant, 
 the purchase money being paid either in a lump sum or in 
 periodical instalments until the commencement of the annuity. 
 
 Antedate. — To date a cheque or other document earlier than the 
 day on which the cheque or document was written. Thus, a 
 letter or cheque written on August 1, but dated July 31, would 
 be antedated. 
 
 Appraise. — To estimate the value of property or goods. The act is 
 called an appraisal and the value arrived at is known as the 
 appraised value. Thus, if about to purchase a business con- 
 cern whose assets included fixed property, an appraisal would 
 be made of same as well as of the stock in trade. 
 
 Appreciation. — Increase in value. The term is usually employed 
 to indicate an increase of a more or less spontaneous nature in 
 the value of an asset, as in stocks and bonds. (See Deprecia- 
 tion.) 
 
 Appropriation of Payments. — When a payment is made to a creditor 
 the debtor must signify his intention as to its application before 
 or at the time of payment, otherwise the creditor may apply 
 it as he likes, even toward the settlement of a prescribed debt. 
 
 Appurtenances. — Things or rights which appertain or belong to a 
 property and which pass along with the property when it is 
 sold or leased; such as, rights of way, buildings, fences, etc. 
 
 Arbitration. — The act of settling a dispute by submitting it to one 
 or more neutral persons, named by the parties to the dispute, 
 whose decision, which must be in writing and signed, is called 
 the Award. 
 
 Arbitration of Exchange. — Sometimes called arbitrage (especially 
 when applied to operations in stocks and bonds) is a calcula- 
 tion based on the rates of exchange at three or more places, to 
 determine the difference in money values, or a calculation 
 based on the money values to determine the rates of exchange 
 between different places. When three places are involved, 
 the calculation is called simple arbitration, when more than 
 
152 Glossary of Financial Terms 
 
 three places, compound arbitration. The operation calls for 
 expert knowledge, and is confined principally to the large 
 money centres. (See Indirect Exchange.) 
 
 Articles. — Separate parts of a written agreement. The different 
 terms in a partnership agreement are the articles of partner- 
 ship; the clauses regulating the conduct of a company, as agreed 
 upon at its formation, are known as articles of association, 
 etc. The word "articles" also refers to things of a tangible 
 nature, such as different articles for sale, etc. 
 
 As Per Advice. — A phrase sometimes found in l)ills of exchange 
 signifying that notice of the draft has already been sent. 
 
 Assets. — Those things of value that are possessed by a person or busi- 
 ness. Fixed Assets would include property; such as, 
 land, buildings, plant and machinery, etc., by means of which 
 a business is carried on, while Liquid, Floating or Current 
 Assets are those used in business transactions; such as, cash, 
 stock in trade, accounts and bills receivable, all of which are 
 quickly realizable. Goodwill is an intangible asset that can- 
 not be transferred apart from the business with which it is 
 connected and the value of which can be taken credit for only 
 when actually transferred. It should never appear in the 
 accounts at a value higher than that paid for it. Then, while 
 it is a capital or fixed asset, it belongs in reality to a class by 
 itself. 
 
 Asset Currency. — A bank note issue secured by the general assets 
 of a bank. The special advantage of asset currency is its 
 elasticity, a most valuable feature. The note circulation of 
 the Canadian banks has established the merits of this form of 
 currency. 
 
 Assignee. — (1) The person to whom a failing debtor transfers all of 
 his remaining property for the purpose of having it distributed 
 among his creditors. (2) One to whom anything is assigned. 
 
 Assignment. — The transfer of property to a person known as the 
 Assignee usually for the benefit of the creditors of the person 
 making the transfer, who is known as the Assignor. To 
 transfer property as abo\'e is to Assign. \Vc also transfer 
 mortgage rights and rights under other instruments under seal 
 by assignment which is in the form of a special document. 
 
Glossary op Financial Terms 153 
 
 Assume. — To take o\'er the liability of another. If, for instance, 
 
 A owes an account which he cannot pay and B agrees in 
 
 writing to pay it, B assumes the liability of A under the 
 account. 
 
 At or Better. — It is a common practice to give an order to buy 
 stock at, say, "90 or better," meaning a lower figure or to sell 
 stock at, say, "90 or better," meaning a higher figure. 
 
 At Sight. — On sterling or foreign bills of exchange it signifies that they 
 are payable on demand, as no days of gr^ce are allowed on sight 
 bills. In Canada and some of the United States, bills drawn 
 at sight are allowed three days' of grace. (See After Sight.) 
 
 Attachment. — A claim on property by virtue of legal execution such 
 as seizure under legal warrant. 
 
 At the Market. — Buying or selling (as stocks) at current prices in- 
 stead of at specified prices. 
 
 Attestation. — Act of witnessing a document in writing and sub- 
 scribing one's name to it as a witness. 
 
 Attorney. — A Private Attorney or Attorney in Fact is a person 
 empowered by another to act in his stead, especially a person 
 who is legally appointed and authorized to transact business 
 for another. The authority of an attorney should be strictly 
 defined by the deed appointing him. (See Power of Attorney.) 
 
 Audit. — An examination of the accounts of any concern by a chartered 
 accountant or other qualified person who examines the balance 
 sheet or statement and verifies the same by reference to vouch- 
 ers, etc. An Audit may be 
 
 1. Detailed — the comparison of the vouchers with the 
 
 sums debited as paid. 
 
 2. Administrative — the comparison of the sums debited 
 
 with the authorities to pay. 
 
 Autumnal Drain. — An expression used in England in reference to 
 the withdrawal of gold from the Bank of England in the autumn 
 or fall, principally for the currency requirements of the harvest. 
 Canadian banks meet a similar demand with their own notes 
 without disturbing the money market. 
 
154 Glossary op FixAxriAi. Terms 
 
 Average. — (1) An expression used in marine insurance signifying 
 damage or loss at sea. In a secondary sense it means a pro- 
 portionate distribution of the loss between the underwriters 
 and ship owners. (See Particular Average.) 
 (2) The mean proportion of unequal (luantities or numbers 
 obtained by dividing their total or aggregate by the number of 
 quantities. 
 
 B 
 
 bal balance, 
 
 B. B bill book, 
 
 bbl barrel, 
 
 bdls bundles, 
 
 b. e bill of exchange, 
 
 bgs bags, 
 
 B/L bill of lading, 
 
 B.P bills payable, 
 
 B.R bills receivable, 
 
 bis bales, 
 
 bot bought, 
 
 bro't brought, 
 
 b.s bill of sale, 
 
 bxes boxes. 
 
 Backwardation. — A London Stock Exchange term to denote the pre- 
 mium or interest paid by sellers for delay in the deli\erv of 
 stock. (See Contango.) 
 
 Bailee. — One to whom tlie goods of another are delivered for a certain 
 purpose. 
 
 Bailment. The (leli\er\- of a thing in trust for some special object 
 or purpose under a contract from the bailee to the bailor, 
 expressed or implied, to conform with tlie object or purpose 
 of the trust and to return the goods, when tin- terms thereof 
 ha\-e bee 1 complied with. 
 
 Bailor. One who delivers goods to another unckr contract of bail- 
 ment. 
 
 Balance. — The difference in amount between the two sides of an 
 account. To balance an account is to close it. 
 
Glossary op Financial Terms 155 
 
 Balance of Trade. — The difference between the money value of the 
 exports of a country and of its imports. A balance of trade 
 may be between two countries or between a country and all 
 other countries. The balance of trade is said to be favorable 
 or unfavorable to a country according as its exports or its 
 imports are in excess. This is a survival of the old notion that 
 the more a country exports in proportion to its imports, the 
 greater its prosperity. This idea is now obsolete, as the figures 
 refer only to the "Visible foreign trade," omitting entirely a 
 most important factor, the "Invisible foreign trade" consist- 
 ing of the import and export of debts which are created in 
 various ways, among the more important being: — 
 
 1. Transactions in stocks and bonds. 
 
 2. Gold Movements. 
 
 3. Payments of interest and dividend. 
 
 4. Payments for freight and insurance. 
 
 5. Tourists' disbursements. 
 
 6. Banking transactions. 
 
 All these naturally affect and may even neutralize the balance 
 created by the import or export of goods. The use of the ex- 
 pression "Balance of Payments" is preferable, as it covers 
 the net results of both the visible and invisible foreign trade. 
 
 Balance Sheet.— A statement showing in condensed form the re- 
 sources and liabilities of a business, thus indicating its financial 
 position. 
 
 Ballast. — Heavy matter placed in the hold of a ship when it has no 
 cargo to keep it steady, or when the cargo is of light material. 
 
 Bank Balance. — The amount on deposit at the bank. 
 
 Bank Book. — The passbook of the depositor in which is recorded 
 the deposits and withdrawals and periodically (generally 
 monthly), when balanced off, the balance on deposit, if any, 
 after meeting cheques and other claims that have been pre- 
 sented. The balance so shown will differ from the bank balance 
 as indicated in the cash book of the business by the amount of 
 cheques issued, but not yet presented to the bank for payment. 
 The passbook is gradually being superseded by a statement 
 rendered monthly or oftener by the bank. 
 
156 Gloss^iry of Financial Terms 
 
 Banking Hours.— In Canada, generally from 10 a.m. to 3 p.m. (1 
 p.m. on Saturday), the time during which the banks are open 
 to transact business with the public in contradistinction to the 
 office hours of a bank 9 a.m. to 6 p.m. 
 
 Bank of England Rate. — The minimum rate at which the Bank of 
 England will discount prime three months' bills or advance 
 money against approved securities. The rate has a direct 
 relation to foreign exchange rates and the movement of gold. 
 The raising of the rate raises the value of money and attracts 
 gold from foreign centres, and the lowering of the rate tends 
 to lower the value of money. The Bank frequently insures 
 the effectiveness of the rate by borrowing money itself in the 
 open market, thus denuding it of supplies. The Bank is 
 governed in its action by the relation which its reserve of gold 
 and silver coin bears to its deposits; this proportion is seldom 
 allowed to fall below 30%, while it sometirnes rises above 50%, 
 the average being about 43%. In the statement below, it is 
 493^%. (See Bank Rate.) 
 
 Bank of England Return. — The Return is divided into two parts- 
 Issue and Banking Departments. It appears every Thursday 
 afternoon, and shows the condition of the bank at the close 
 of business on Wednesdav. 
 
Glossary of Financial Terms 
 
 15; 
 
 Return for the Week Ending 11th March, 1914: 
 ISSUE DEPARTMENT 
 
 Liabilities 
 1. Notes issued £58,621,125 
 
 £58,621,125 
 
 Explanation 
 
 means the amount of notes 
 circulating in the country, 
 or held in the reserves of 
 different banks, including 
 those in the Banking De- 
 partment below. 
 
 Assets ^ 
 
 2. Government Debt £11,015,100 represents the amount due 
 
 by the Government to the 
 Bank of England. It was 
 originally £1,200,000, the 
 first capital of the bank 
 when it was established in 
 1694. It has stood at its 
 present total, £11,015,100 
 since 1816. 
 
 These are interest bearing 
 investments selected by the 
 directors. 
 
 3. Other securities. . . £ 7,434,900 
 
 Authorized issue. . £18,450,000 
 Gold coin and bul- 
 lion £40,171,125 
 
 £58,621,125 
 
 represents gold held as se- 
 curity for the notes issued 
 in excess of the authorized 
 issue of £18,450,000 secured 
 by 2 and 3. 
 
158 Gloss-iry of Financial Terms 
 
 BANKING DEPARTMENT 
 
 Liabilities Explanation 
 
 5. Proprietors'capital £14,553,000 Capital stock of the bank, 
 
 unchanged since 1816. 
 
 0. Rest £ 3,685,192 The accumulated profits, al- 
 ways kept at a total ex- 
 ceeding £3,000,000, the ex- 
 cess being available for 
 dividends. 
 
 7. Public Deposits. . £24,943,039 Government deposits from 
 
 revenues, etc., including 
 Exchequer, Sa\'ings Banks, 
 National Debt, etc. 
 
 8. Other Deposits. . . £39.922.243 Includes all other official 
 
 accounts, bank and indi- 
 ^ vidual deposits. 
 
 9. Se\'en day and 
 
 other bills £ 19,545 Bank post bills, (q.v.). 
 
 £83,123,019 
 
 Assets 
 
 10. Government 
 
 Securities £11,152,089 Consols, exchequer bills, 
 
 treasury bonds and other 
 Government obligations. 
 The taxes are a pledge for 
 their redemption. 
 
 11. Othei Securities. £40,115,781 Bills of exchange, advances 
 
 to customers and to the 
 market in general. 
 
 12. Notes* £30,383,590 Bank of England notes 
 
 which are obtained from 
 the Issue Department in 
 exchange for coin and bul- 
 lion. 
 
 13. Gold and siKer 
 
 coin £ 1,470,959 Till money. 
 
 £83,123,019 
 *The.«e notes represent actual ,u<)l<l held in the Issue Department. 
 
Glossary of Financial Terms 159 
 
 The Bank of England reserve is the amount of notes and 
 metal in the Banking Department (12 and 13) £31,854,549. 
 
 In this return the proportion of the reserve, £31,854,549, 
 to the deposits, £64,365,282, is 493/^%. 
 
 The directors, after a consideration of the return at their 
 weekly meeting each Thursday, decide whether any change 
 should be made in the rate, and their decision is of international 
 interest. 
 
 Bank Post Bills. — Bills of Exchange, issued free of commission by 
 the Bank of England, payable at any branch for sums between 
 £10 and £1,000. Such bills are payable seven or more days after 
 sight, and are not subject to days of grace. The bank's profit 
 is derived from the use of the money for the seven days. 
 
 Bank Rate. — In London the Bank rate is the discount rate of the 
 Bank of England, whereas the open market rate is the rate ot 
 the other banks and dealers in commercial paper. In Paris 
 the bank rate is the rate of the bank of France; in Berlin, that 
 of the Imperial Bank; and so on. In New York the bank 
 rate is the uniform rate of the banks as distinguished from 
 the varying rates of the other lenders. 
 
 Bankrupt. — One who is unable to pay his debts, having failed in 
 business. 
 
 Bank Stock. — Shares in the capital stock of an incorporated joint 
 stock banking institution. In Canada such ''nstitutions are 
 known as chartered banks. 
 
 Barter. — To trade by exchange of goods as distinguished from trading 
 by the use of money. 
 
 Bear and Bull. — A Bear is an operator in stocks who is "short" of 
 stock, and wishes to buy at a lower rat^ to do which, he en- 
 deavors to depress the price of the stock of which he is "short." 
 Against this we have operators who are holding stocks for 
 advance, having stock to sell, it being said that they are "long" 
 of stock. These holders endeavor to advance the price of the 
 stock of which they are "long," and the term applied to them 
 is Bulls. 
 
160 Glossary of Financial Terms 
 
 Below Par. -When the price of stocks or shares is below their nominal 
 value, they are said to be at a discount or below par. 
 
 Between Banks. — This term is applied lo foreign or domestic ex- 
 change transactions between banks, the rates quoted being for 
 large amounts only and are known as "actual rates" in dis- 
 tinction to "posted" or counter rates. 
 
 Bill Book. A book containing a record and particulars of drafts 
 and notes received by a concern from others (bills receivable) 
 and drafts or notes given to others (bills payable). 
 
 Bill Broker. — An English term, a person who is engaged as an inter- 
 mediary in the ]ourchase and sale of bills of exchange and 
 promissory notes. It is his business to know the state of 
 the exchange and discount markets and their probable course. 
 A dealer in foreign bills is generally called an exchange broker. 
 
 Billhead. — A form, with printed heading, on which bills or accounts 
 are rendered. 
 
 Bill of Exchange or Draft. — An unconditional order in writing, ad- 
 dressed by one person, the drawer, to another, the drawee, 
 signed by the drawer and requiring the drawee to pay on de- 
 mand (or at a fixed or determinable future date) a sum certain 
 in money to (or to the order of) a specified person, or to bearer. 
 This is the universally recognized definition of a bill of exchange. 
 The wholesale transactions of the world are effected by bills of 
 exchange and ihey constitute the most important circulating 
 medium of both national and interriational finance. There is 
 practical]}- no difference between a bill of exchange and a draft, 
 but the former term is commonly applied to an order for pay- 
 ment in a foreign country, while the latter refers to inland bills. 
 (Sections 17 and 25, B.E.A.) 
 
 If a foreign bill of exchange is drawn for the value of goods 
 exported and a bill of lading, letter of hypothecation, insurance 
 certificates (ci.v.). etc., are attached, it is known as a Docu- 
 mentary Bill of Exchange and instructions are attached to 
 surrender the documents on payment (D/P) or on acceptance 
 (D/A). If no documents are attached, it is known as a Clean 
 Bill of Exchange. Bills of exchange and the accompanying 
 documents, if any, are usually drawn in duplicate, the originals 
 being forwarded on the first outgoing steamer and the duplicates 
 bv the next. 
 
Glossary op Financial Terms 161 
 
 Sometimes the second of exchange is retained until a satis- 
 factory sale can be made, in which case the maturity of the bill 
 is based on the date that the first of exchange was accepted in 
 London as determined by the arrival of the mail boat. The 
 second of exchange bears the name and address of the holder 
 of the accepted bill and before payment the two are attached, 
 thus becoming one bill. A bill of exchange may be taken up 
 any number of times before it is due, and may be put into cir- 
 culation between each payment, but once it is paid by the 
 accepter on its becoming due, it cannot again be put into 
 circulation. 
 
 Bill of Lading. — An acknowledgment of the receipt of goods for 
 transportation issued by a railroad, steamship company or 
 other carrier. 
 
 A Railroad Bill of Lading is usually signed by the 
 station or freight agent for the railroad company. It is issued 
 in triplicate: — 
 
 1. Original 
 
 2. Shipping Order 
 
 3. Memorandum 
 
 The original of the Order Bill of Lading is printed on 
 yellow paper and is the form that should be attached to drafts 
 as it only is negotiable. 
 
 The other two parts are printed on blue paper. 
 
 All three parts of the non-negotiable bill of lading are 
 printed on white paper, which like the blue forms of the "Order" 
 bill of lading are of no value except to prove delivery to the 
 railway company. 
 
 A Marine Bill of Lading is usually signed by the master 
 of the ship as agent of the owners and specifies the name of the 
 shipper, the amount, the destination of the ship, the goods, the 
 name of the consignee, the rate of freight and the number of 
 bills of lading in the set. As it is issued in sets of two or three, 
 it is important, in purchasing a documentary bill of exchange, 
 to see that the whole of the set issued is attached and uniform. 
 
 Bill of Sale. — A transfer, in writing, of the ownership of personal pro- 
 perty (such as, livestock, household furniture, stock in trade, 
 etc.), given by the seller to the buyer. The bill of sale is 
 resorted to particularly when the property, although sold, is 
 
162 Glossary of Fixaxcial Terms 
 
 not moved from the possession of the seller immediately, and 
 thus, when the bill of sale is registered, the owner's (purchaser's) 
 title is protected should the former owner attempt to sell 
 again or should his property be taken over by creditors. The 
 seller is also protected from fraud on the part of the buyer. 
 
 The bill of sale differs from a chattel mortgage in that the 
 sale is outright and a return is not contemplated. (See Chattel 
 Mortgage.) 
 
 Bills Payable. — Drafts or notes that a concern is liable to pay. 
 
 Bills Receivable. — Drafts or notes the payment of which a concern 
 expects to receive from others. 
 
 Bimetallic Standard. — -The bimetallic or double standard exists 
 when the basis of values is gold and silver, at rates established 
 by law. This must not be confused with bimetallism, as an 
 essential feature of the latter is a mint open to the coinage 
 of any quantity of either gold or silver, that may be brought to 
 it for coinage. In reality, gold is the real measure of value in 
 countries with a double standard, and is admitted to coinage 
 without restriction, while silver is coined in limited quantities 
 only. 
 
 Bimetallism. — The unlimited coinage (at an established ratio) of 
 both gold and silver coins of full debt paying power enabling 
 a debtor to discharge his liabilities in either of the metals at 
 the ratio fixed by law. Naturally he would invariably choose 
 the cheaper. 
 
 Blank Endorsement. — An endorsement without the addition of the 
 name of the person to whom a bill of exchange or other document 
 is transferred, the name of the payee alone being written. By 
 such endorsement the ownership is transferred to any one 
 who may be in possession of the paper. It is the opposite of a 
 special endorsement where the name of the transferee is given. 
 (Section 67 B.E.A.) 
 
 Bona Fide. — With good faith; i.e., without fraud or unfair dealing. 
 A bona fide holder of a security generally means one who has 
 no notice of any defect attached to it. 
 
 Bonds. — A Bond is a promise to pay issued by a corporation, the 
 payments to be made according to the terms of the bond. There 
 
Glossary of Financial Terms 163 
 
 is usually a distinction made between a Debenture and a bond, 
 although, strictly speaking, a debenture may be termed a 
 
 bond. 
 
 The term debenture is usually confined to those promises 
 to pay issued by municipal corporations, the payment of which 
 is a charge against revenue from taxation, and in connection 
 with it no regular form of mortgage is drawn up and registered 
 against the assets of the corporation, which are the ultimate 
 security for the loan, the security given being the tax power 
 of the municipality. 
 
 The term bond, on the other hand, is generally taken to 
 mean a promise to pay, such as is issued by industrial corpora- 
 tions, etc., and in security for which a mortgage is drawn up and 
 deposited with a trustee, pledging definite assets (except in 
 the case of Income Bonds) of the corporation as security for 
 the payment of the loan. The payment of Interest on In- 
 come Bonds depends on the income being sufficient to pay it. 
 Sometimes it is cumulative. There will not be foreclosure 
 because of failure to pay interest on Ir.come Bonds. 
 
 A Registered Bond is one valuable only to the one to 
 whom it is issued, his name being placed in the register of the 
 corporation as the owner of the bond. The name is also 
 written or endorsed on the bond. 
 
 A Coupon Bond is one which has attached to it coupons, 
 or certificates, for the amount due at the various dates of pay- 
 ment of interest or principal or both, and which are torn off 
 and handed in for collection during the period of the bond. 
 These are negotiable bonds; that is, they may be transferred 
 to bearer or by endorsement, without any notification whatever 
 being given the corporation. It is frequently arranged that 
 Coupon Bonds may be registered. 
 
 Debentures and Bonds may also be classified as redeemable 
 or terminable, and irredeemable or perpetual. The former 
 are those which provide for the repayment of principal sums, 
 while the latter are repayable only on default of payment of 
 interest, or on the winding-up of the corporation. While 
 Debentures or Bonds may be issued at par, at a premium or at 
 a discount, it must be borne in mind that they are redeemable 
 at par at maturity. Bonds secured by a mortgage are frequently 
 termed Mortgage Bonds. First Mortgage Bonds are those 
 secured by first mortgage on the assets; Second Mortgage Bonds, 
 those secured by second mortgage; etc. etc. 
 
164 Glossary op Financial Terms 
 
 Bonus. — (1) A sum of money paid to a party over and above that to 
 which he is entitled by his contract. 
 
 (2) A sum of money or other consideration voted by a 
 municipal council to a manufacturer, etc., on condition that 
 the latter executes a contract of benefit to the locality; for 
 instance, a bonus to a factory or to a railway. 
 
 (3) Common Stock given as a bonus with preferred stock 
 or bonds — This is frequently met with in connection with 
 flotations of stock or bonds of large industrial corporations, 
 and the question of how^ this common stock can be given away 
 causes more or less trouble at first sight to students in accounts. 
 Such stock must first have been issued fully paid up in return 
 for property of some description, perhaps goodwill or services; 
 for instance,, if a number of concerns are being combined into 
 one, the person bringing about the amalgamation ma\' purchase 
 the various subsidiary concerns at definite figures. In turning 
 them over to the new company, he wall base his value on \arious 
 conditions and circumstances, and will receive, in all probability, 
 an amount considerably in advance of that which he has 
 promised to give. The payment of this amount will consist 
 largely of common stock. He will thus have a considerable 
 quantity of common stock on hand as his own property. If 
 he is given the preferred stock or bonds to sell for the company, 
 he will probably receive a certain rate or amount for his services. 
 This may be payable in cash or common stock, or both. Such 
 common stock given to him in return for services rendered 
 may, of course, be issued fully paid up. In oiifering the pre- 
 ferred stock or bonds, he may then give a part of that which is 
 his own property as a bonus to make the issue more attractive 
 to prospective purchasers. The above, while setting out only 
 the principle, will be sufficient to indicate that stock is not 
 given by the company itself as a bonus, but that it has 
 been issued fully paid up, and is given by the owner thereof. 
 In such cases the entr>- will already have been made for the issue 
 of the common stock, and when it is given as a bonus, the only 
 book entry will be a transfer in the share ledger from the 
 previous holder to the new holder. 
 
 Bottomry Bond. — A contract whereby the bottom or whole of a 
 ship is hypothecated to repay a loan, with interest, on the 
 completion of an intended voyage, but which becomes void 
 if the ship is lost. x'\s the risk is great, the interest in these 
 transactions is correspondingly high. (See Respondentia Bond.) 
 
Glossary op Financial Terms 165 
 
 Bought and Sold Note.^A written memorandum of sale delivered 
 by a broker effecting a sale, to the buyer. 
 
 Bounty. — A grant or allowance from a government or state for the 
 encouragement of a trade or industry; for instance, the Sugar 
 Bounty. 
 
 Bourse. — A stock exchange. 
 
 Breakage. — An allowance made on goods imported in breakable con- 
 tainers, such as bottles. 
 
 Broker. — An agent, who acts as middleman between buyer and seller. 
 Usually the work of a broker is confined to a particular line; 
 hence we have Stock Brokers, Bill Brokers, Customs Brokers, 
 Real Estate Brokers, etc. 
 
 Brokerage. — The charges made by a broker for his services, usually 
 a percentage; as, commission. 
 
 Bullion. — Gold or silver in ingots or mass, also old or uncurrent coin 
 in mass, intended for recoinage, or gold or silver coins considered 
 simply as a commodity. 
 
 By-Laws. — The private by-laws or regulations made by a corporation 
 for its own government. 
 
 c 
 
 c. or cts cents, 
 
 C/A capital account, 
 
 C.B cash book. 
 
 C&F cost and freight (see Loco.), 
 
 eg centigramme, 
 
 chgs charges, 
 
 c.i.f cost, insurance and freight, 
 
 (see Loco.), 
 
 ck check or cheque, 
 
 cm centimetre, 
 
 Co company, 
 
 C.O.D. cash (or collect) on delivery, 
 
 com commission, 
 
 com'l commercial, 
 
 cons't consignment, 
 
166 Glossary of Financial Terms 
 
 C/P charter party, 
 
 cr creditor, credit, 
 
 C/T cable transfer, 
 
 ctg cartage, 
 
 cum. div 
 
 cum. d/ 
 
 c. d 
 
 cwt hundredweight. 
 
 with dixidend, 
 
 Cable Transfers. — Generally known as Cables, a transfer of credit 
 by cable. Cable payments being immediate, no question of 
 interest is involved. The mail time between the points in\olved 
 and the interest rate are two of the chief factors in determining 
 the difference in the rate of exchange between cables and 
 demand bills. The higher the rate of interest the more the 
 quotations diverge. 
 
 Call Money. — Sums of money, payable on call or demand, borrowed 
 by stock brokers, bill brokers and others. Collateral is usually 
 provided to secure these loans. The mone>- so loaned generally 
 represents the surplus or floating money on the market. By 
 New York Stock Exchange rules a demand for the return of a 
 call loan must be made before 1 p.m., and payment must be made 
 before or at 2.15 p.m. the same day. In London, these loans 
 are called "day to day" loans. 
 
 Calls.- — Demands on subscribers to make instalment payment on 
 shares. (See also Puts and Calls.) 
 
 Cambist. — (1) A dealer in foreign exchange. 
 
 (2) Books giving moneys, weights, and measures of differ- 
 ent countries and their equivalents. 
 
 Capital. — The investment in a business. This ma\- represent the 
 amount invested by a single proprietor, partnership or company, 
 while the term Capital Stock would apply to that of a company 
 alone. In addition to invested capital, which represents pro- 
 prietors' interest, capital can be raised by mortgage or mort- 
 gage bonds, but this is distinguished from invested capital by 
 being shown apart from it in a statement under an appropriate 
 heading such as "Mortgage Payable" or "Bonds Payable." 
 
 Capital Stock. — The amount of capital paid in by the shareholders of 
 a company. This is the actual paid up capital of a company, 
 but the terms Authorized Capital and Subscribed Capital 
 
r 
 
 Glossary of Financial Terms 167 
 
 are also used to indicate respectively the amount of capital a 
 company is permitted by its charter to issue, and the amount 
 that subscribers have promised to take up and pay for, but 
 which may not yet have been paid. 
 
 Case of Need. — A notification sometimes put on a bill of exchange 
 
 naming a party who will guarantee payment, etc., for the honour 
 
 - of the drawer or one of the endorsers should the bill not be 
 
 met at maturity. The usual form is "In case of need apply 
 
 to N — & Co." (See Acceptance for Honour.) 
 
 Cash. — Gold, silver and copper coins. Dominion Government notes, 
 Chartered Bank notes, money orders, bank drafts, cheques 
 and anything that may be given or received as money, and is 
 immediately realizable. 
 
 Cash Reserve. — (See Reserve.) 
 
 Caveat (Let Him Take Heed). — A warning or notice entered on the 
 books of a Registry Olifice or Court to prevent a certain step 
 being taken; for example, the sale or mortgage of a piece of 
 land, without informing the caveator. 
 
 Certified Cheques. — A cheque which has been marked or accepted 
 by the bank on which it is drawn. This is done by means of a 
 stamped certification on the face of the cheque and is a recogni- 
 tion by the bank that the cheque is good and of an undertaking 
 to pay it on presentation. 
 
 Certiorari. — A writ from a higher court commanding the records of 
 a case pending in a lower court to be brought before the former. 
 
 Cestui Que Trust. — One for whose benefit property is held by a 
 trustee. 
 
 Chain Rule. — A method of calculation used in indirect or arbitrated 
 exchange. It consists of arranging the terms of the exchanges 
 in the various currencies under consideration in such a manner 
 that the required, equivalent is quickly obtained. 
 
 How many x = b, How many dollars (x) = 100 rupees, 
 
 if b = c if 1 rupee= 16 pence 
 
 and c = d and 48 pence = 1 dollar? 
 
 and d = x? 
 
 100X16X1 
 
 x = 
 
 = $33^ (answer). 
 
 1X48 
 
 Note that the first terms and the last terms are always in the 
 same currency. 
 
168 Glossary of Financial Terms 
 
 Charges. — In a commercial sense this refers particularly to expenses 
 incurred in transporting or handling goods. The term is most 
 frequently found in relation to a commission business. 
 
 Charter. — (1) A special act of legislature creating a particular cor- 
 poration. 
 
 (2) A formal instrument by which a government grants 
 special rights or privileges to a particular person or persons. 
 
 (3) To hire or let a vessel, or part of it. (See Charter 
 Party.) 
 
 Charter Party. — The agreement or contract between the shipper of 
 goods and the ship owner entered into when a vessel is chartered. 
 
 Chattel Mortgage. — A conditional sale of personal property which is 
 to become void after a certain thing happens. Chiefly used 
 as a security for the payment of money. 
 
 A chattel mortgage differs from a bill of sale (q.v.) in so 
 far as it empowers the creditor or mortgagee to sell the goods 
 if the money is not repaid with interest at the time appointed, 
 or the obligation otherwise discharged. 
 
 There is no chattel mortgage in the Province of Quebec. 
 (See Bill of Sale.) 
 
 Chattels. — Personal movable property. 
 
 Cheap Money. — Money is said to be cheap when the floating supply 
 of gold is plentiful and interest rates are consequently low. At 
 such times the prices of stocks and bonds are likely to advance, 
 not because they are worth more, but because money is worth 
 less, its purchasing power having decreased. 
 
 Cheque. — A bill of exchange drawn on a bank and payable on demand. 
 (Section 165, B.E.A.) 
 
 Cheque to Bearer. — A cheque "to bearer" is payable to any person 
 who presents it. If crossed, however, it must be paid through 
 a bank. 
 
 Cheque to Order. — A cheque to order must be endorsed by the 
 payee before payment. If crossed, it must be paid through a 
 bank. (See Crossed Cheques.) 
 
 Cheque Rate.— (See Short Exchange.) 
 
 Chose in Action. — Personal property not in actual possession, but 
 which the owner has the right of action to recover, such as a 
 debt, etc. 
 
\ 
 
 Glossary of Financial Terms 169 
 
 Circular Letter of Credit. — (See Letter of Credit.) 
 
 Circular Note. — A note for a specified round amount, such as £10 
 or £20 issued by a bank and payable by any one of its corre- 
 spondents at the current rate of exchange. These notes are used 
 with a letter of indication and have proved to be very useful 
 for travellers. (See Travellers' Cheques.) 
 
 Clean Bills. — The name given to a bill of exchange which is not 
 accompanied by documents of any kind, such as bills of lading, 
 etc. 
 
 Clearing Houses. — histitutions formed in large financial centres 
 for the purpose of facilitating the daily exchange of cheques, 
 etc., between the various member banks, so that at the end of 
 the day, each member will have only one balance, either to settle 
 or to receive. In the United States clearing houses have 
 assumed wider functions. 
 
 Clearing House Gold Certificates. — Certificates or receipts for gold 
 deposited in the vaults of the clearing house or the sub-treasury 
 in New York are transferrable by endorsement. They are used 
 only in settling clearing house balances, and may be counted as 
 gold in the reserves. 
 
 Clearing House Loan Certificates. — Certificates issued by the 
 New York Clearing House in times of monetary stringency. 
 They are issued to banks against deposits of approved collateral 
 to be used in the settlement of daily balances and are retired 
 as promptly as circumstances will permit. 
 
 Code. — (1) A systematic collection of laws and statutes so arranged 
 as to avoid inconsistencies, etc.. 
 
 (2) Cipher Code is a set of words arbitrarily representing 
 other words or sentences, etc., thus affording both secrecy 
 and brevity in telegraphing or cabling. 
 
 Codicil. — A supplement to a will for the purpose of altering or adding 
 to its contents. 
 
 Collated Telegram. — A telegram that is repeated, at the desire and 
 cost of the sender, thus insuring its correct transmission. 
 
 Collaterals. — Security for loans or other indebtedness. Thus, if we 
 borrow funds from a bank, giving our promissory note there- 
 for, we may be called on to furnish further security of a definite 
 tangible nature; such as, bills receivable, shares of stock, 
 bonds, etc. 
 
170 Glossary of Financial Terms 
 
 Commercial Crisis. — A period of general distress throughout a 
 country, often international in its cause and effect. The crisis 
 itself is the turnirg point, when a period of expansion is changed 
 into one of contraction of credit and business. Crises are gener- 
 ally due to over-expansion and often result in serious failures 
 and panics. 
 
 Commercial Letter of Credit. — (See Letter of Credit.) 
 
 Commercial Paper. — Written orders or promises for the payment 
 of money used in commercial transactions; such as, promissory 
 notes, drafts, etc. 
 
 Commission. — A sum given for the performance of a service, especi- 
 ally a charge of so much per cent, made by a bank or broker, 
 for bu\'ing or selling exchange-or securities. (See Exchange.) 
 
 Common Stock. — That part of the capitalization of a company ujion 
 which dividends may be paid only after satisfying the require- 
 ments of bonds and Preferred Stock, if any. Common stock, 
 as a rule, controls the policy of a company through its \otirg 
 power. 
 
 Composition. — (See Compromise.) 
 
 Composition Deed. — An agreement among creditors by which the\- 
 agree to accept a payment of so much on the dollar from a 
 bankrupt or an insolvent instead of the whole amount owing. 
 The agreement of each creditor with the others is the consider- 
 ation which binds the contract with the debtor. 
 
 Compromise. — An agreement between a debtor and his creditors, 
 b\' which the latter consent to accept a certain proportion of 
 their claims and discharge the debtor from the remainder. 
 
 Concurrent. — Existing together. A consideration is concurrent 
 when the acts of the parties are to be performed at the same 
 time. 
 
 Condition Precedent. —A modifying clause of an agreement requir- 
 ing some act to be perfgrmed by one person before another is 
 liable, or in order to make him liable. 
 
 Condition Subsequent. — A part of an agreement relating to a future 
 event, upon the happening of which the obligation is no longer 
 upon one of the parties to a contract. 
 
f 
 
 Glossary of Financial Terms , 171 
 
 Consideration. — The reason or inducement in a contract upon which 
 the parties consent to be bound. Every contract must have a 
 consideration. 
 
 Consignee. — The person to whom goods are consigned or sent, the 
 goods being called a consignment. This term while used 
 particularly in relation to goods sent to an agent or commission 
 merchant to be sold on commission is not confined thereto in 
 general usage. 
 
 Consignment. — (1) The sending or delivering of goods by one person, 
 the consignor, to another person, the consignee, generally in 
 another town or country. 
 
 (2) The goods consigned. 
 
 (3) A written instrument by which something is consigned. 
 
 Consignor. — The person or firm, who sends the goods to the consignee. 
 To him the goods will be known as a shipment. 
 
 Consols. — This term is a contraction of "consolidated funds", and is 
 generally used in reference to the funded debt of Great Britian, 
 the official name being "Consolidated Annuities." 
 
 Nine separate loans in the form of annuities at different 
 rates were consolidated into a 3 per cent, stock in 1751. 
 In 1888, these were converted into a 2^ per cent, stock and later 
 on, in 1903, into a 23^2 per cent, stock, their present form. 
 The price of "Consols" is regarded as the gauge of the national 
 credit of Great Britain. "Consols" are practically perpetual 
 annuities, as the principal is only payable at the pleasure of 
 the Government. 
 
 Constant. — A quantity of fixed value in foreign exchange or other 
 calculations, and an invaluable labour saving device in business. 
 Thus 15/73 is the constant, which multiplied by any number 
 of dollars will give the equivalent number of pounds at par 
 (4.86%) and conversely 73/15 multiplied by pounds will give 
 the equivalent in dollars. 
 
 In gold bar calculations the constant 378.98363 divided by 
 Bank of England price per ounce for gold bars in shillings will 
 give the equivalent quotation per pound in dollars. Thus: — 
 
 378.98363 „, _._ 378.98363 ^, ^_,. 
 
 = $4.866o; =$4.8744. 
 
 77/lOH 77/9 
 
 Consular Certificate. — (1) Some countries require a certificate 
 signed by their consul or representative at the point of shipment 
 to accompany all imports of over a certain value. Three copies 
 
172 Glossary op Financial Terms 
 
 are generally made out: the original which is retained at the 
 Consulate; the duplicate which is handed to the shipper to 
 send to consignee and the triplicate which is forwarded to the 
 custom house at the port of entry. 
 
 (2) When powers of attorney or other legal documents are 
 executed in a foreign country, a certificate from the British 
 Consul at that point is generally required as a proof of the 
 genuineness of the signatures, etc. 
 
 Contango. — A London Stock Exchange term for the premium or rate 
 paid for carrying shares from one settlement day to another. 
 
 Continental Exchange. — Continental exchange or a continental 
 bill is one payable on the Continent of Europe, or elsewhere in 
 Europe than Great Britain. 
 
 Continental Paper Money. — Currency issued by the Continental 
 Congress during the Revolutionary War, and used to defray 
 the expenses of the war. Over $360,000,000 of this currency 
 was issued and it depreciated to such an extent that at one time 
 it was said a SI, 000 bill was worth only one dollar in silver, 
 hence the term "not worth a Continental." 
 
 Contingent Liability. — The liability of a person, which only becomes 
 enforceable against him in certain events, such as the non-pay- 
 ment of a note on which he is secondarily liable. 
 
 Contributories. — Those persons who are liable to contribute to the 
 assets of a joint stock company in the event of its being wound up ; 
 e.g., shareholders, who have not fully paid for their shares, are 
 liable for the unpaid balance. In the case of Canadian chartered 
 banks shareholders are liable in addition for an amount equal 
 to the par value of the shares, hence the term, Double 
 Liability, as applied to holders of bank shares. 
 
 Convertible Paper Currency. — Paper money, which the holder has 
 the right to present at the place of issue at any time and receive 
 its face value in standard gold or silver coin. (See Inconvertible 
 Money.) 
 
 Conveyance. — The transfer of the ownership of property by one person 
 to another by legal document. 
 
 Cooperage. — Expenses inv^olved in repairs to casks, boxes, or other 
 containers. 
 
Glossary of Financial Terms 17o 
 
 Copyright.— The sale and exclusive right of printing or otherwise 
 increasing the number of copies of a work of a literary, artistic 
 or musical character. 
 
 Corporation.— A collection of individuals united by authority of law 
 into one body under a special name, with the capacity of per- 
 petual succession and to act in many respects as an individual. 
 
 Coulisse.— The unofficial or "curb" market of the Paris Bourse, 
 consisting in the main of high class firms and arbitrage houses. 
 The members are called "coulisseurs." 
 
 Council Drafts.— Drafts issued by the Indian Council in London, 
 upon the Indian Government and payable at the banks in India. 
 They are issued to correct the exchange and to prevent frequent 
 transmission of bullion. 
 
 Counterfoil.— That part of a writing (as the stub of a cheque) kept 
 for reference, and on which is noted the main particulars con- 
 tained on the part which has been issued. 
 
 Country Clearing.— A system in England by which cheques on 
 country banks are sent to London, for the purpose of being paid 
 by London agents, through the clearing house and by it dis- 
 tributed. The system obtains in a lesser degree in Canada and 
 the United States. 
 
 Country Notes.— In Great Britain means a circulating note, payable 
 to bearer on demand, issued by a bank other than the Bank of 
 England (a note issued by the latter is known as a bank note) 
 and can only be issued by banks which have no branch in 
 London. 
 
 Course of Exchange.— This is the English name for a report or 
 record of foreign exchange rates. These rates are issued by 
 the various exchange brokers in London at the close of the mar- 
 ket on Tuesday and Thursday each week. 
 
 Covenant.— Any transaction contained in a sealed instrument. 
 
 Covering.— In foreign exchange dealings, "covering" consists in pro- 
 viding funds by bills of exchange, cables, etc., to meet drafts 
 already issued. A bank in Canada, for instance, might draw 
 on the Havre branch of the Credit Lyonnais and provide the 
 means of reimbursing the latter bank by remitting the necessary 
 funds to the London or Paris branch of the Credit Lyonnais. 
 
1 , 4 Glossary of P'ixaxcial Terms 
 
 Also II stock exchange term, signifying the buying in of 
 >6tock that has been sold "short" (q.v.) in order to meet engage- 
 ments, or as protection from loss. 
 
 Coverture. The legal state and condition of a married woman. 
 
 Crossed Cheques. — The crossed cheque is not used in Canada, 
 though it is autliorizcd by tiie Bills of Exchange Act (Sec. 168- 
 175). In England, however, where the banks are not bound 
 to identify the holders as they are in Canada, cheques are 
 crossed in order to make it difificult for wrongful holders to 
 obtain payment. 
 
 A cheque is crossed generally by drawing two parallel 
 transverse lines across its face, with or without the word "Bank" 
 ("and Co." is the form given in the Imperial Act). This consti- 
 tutes a "general crossing" and the bank on whom it is drawn 
 will pa}^ it only through a bank. If the name of a particular 
 bank is written between the lines, the cheque is"crossed specially" 
 and may only be paid through and to that bank. If the holder 
 of a crossed cheque is a customer of the drawee bank, the 
 latter must not pay cash, but will credit the customer's account, 
 and the latter can then withdraw the amount by cheque, if he 
 so desire. (Sections 168 to 175, B.E.A.) 
 
 Cum Dividend. — When stocks or shares are sold and the buyer is 
 entitled to the dividend that is due or accruing, he is said to 
 have bought "Cum Dividend. 
 
 If the stock is sold Ex Dividend, the buyer must, on receipt 
 of the di\idend, hand the same over to the seller. 
 
 Cumulative Preference Stock. — Is that preferred stock which, in 
 the case of a shortage in dividends declared in any one year, 
 carries the right to have this deficit payable out of profits of the 
 following years, or out of reserve, or both, before a dividend 
 can be declared on the common stock. This is a privilege 
 that does not belong to Ordinary Preferred Stock. In the 
 accounts, should there be a shortage in di\idends declared on 
 the cumulati\e preferred stock, this shortage does not appear 
 in the balance sheet as a liability, for it is not a charge against 
 the present assets of the company, but only against future dis- 
 tribution of profits. A memo should be made below the balance 
 sheet, however, showing the amount that must be paid to 
 make up this shortage, in addition to the regular annual di\i- 
 
Glossary of Financial Terms , 175 
 
 dends, before any dividends will be payable to holders of 
 common stock. This announces the true situation to any 
 prospective purchasers of other kind of shares. 
 
 Currency. — The circulating medium of a country or the money 
 by means of which sales and purchases are effected, consisting 
 of coin, bank notes and other paper money; in its broad sense, 
 it includes bills of exchange, cheques and other substitutes for 
 money. As one writer says "Money is currency, but currency 
 is not necessarily money." (See Money, Monetary Standard.) 
 
 Currency (of a Bill or Note). — The time between the date of a bill 
 or note and its maturity. When a bill is payable after sight 
 the currency begins from the date of acceptance; when drawn 
 after date, from the date of the bill or note. 
 
 Current Account. — A banking term signifying the amount of money 
 deposited by a customer, which can be added to or withdrawn 
 at any time. Corresponds to "ordinary account." (See 
 Deposit Account.) 
 
 D 
 
 D/A surrender documents on acceptance, 
 
 dbk drawback, 
 
 d.d day's date, 
 
 Dec December, 
 
 dft draft, 
 
 dis discount, 
 
 div dividend, 
 
 D/P surrender documents on payment, 
 
 dr debit, debtor, 
 
 d.s day's sight. 
 
 Days of Grace. — By the law of some countries, three additional days 
 before payment need be made are allowed to the obligant after 
 the nominal maturity of a promissory note, bill of exchange or 
 draft, unless drawn on demand or in the case of Great Britain, 
 at sight. (Section 42, B.E.A.) 
 
 Dear Money. — Money is said to be dear when the floating supply of 
 capital is scarce and interest is therefore high. At such times 
 security prices are -depressed, not because the securities are 
 worth less, but because money is wo-rth more. 
 
176 Glossary op Financial Terms - 
 
 Debenture. — An instrument in the nature of a bond given as an 
 acknowledgement of a de])t, and providing for repayment out 
 of some specified fund or source of income. This is a conveni- 
 ent form of investment. Debentures are sometimes secured 
 only by the general credit of the issuer and not by specifically 
 pledged assets as in the case of bonds. (See Bond.) 
 
 Debenture Stock. -This stock ranks with the ordinary debentures, 
 and the holders are not answerable for any debts or liabilities of 
 the company. Unlike ordinary debentures, however, debenture 
 stock is registered at the head office of the company. In the 
 register, the names and addresses of the several persons entitled 
 to the debenture stock are recorded, with the respective amounts; 
 and all transfers of debenture stock are similarly recorded. 
 This register is accessible for inspection and perusal at all 
 reasonal)le times, without fee, to any shareholder, mortgagee, 
 bondholder, or debenture stockholder of the company. The 
 company delivers to every holder of debenture stock a certi- 
 ficate stating the amount held by him, and the rate of interest 
 payable thereon. The holders of debenture stock are not 
 entitled to be present or to vote at any meeting of the company. 
 They are simply in the position of mortgagees of the company, 
 except that they have not the right to require repayment of 
 the principal of the debenture stock. The company may, 
 from time to time, purchase in the open market and redeem 
 any portion or portions of the debenture stock, which the direc- 
 tors, by a resolution duly made, determine not to be required 
 for the business of the company. 
 
 Deed. — A term applied to any legal instrument under seal, but particu- 
 larly to the sealed instrument used in the conveyance of real 
 estate. 
 
 Deferred Shares. — Stocks or shares, which entitle the holders to divi- 
 dends only after the claims of prior shareholders have been 
 satisfied. Founders shares are frequently made deferred. 
 
 Del Credere. — An Italian phrase signifying a commission charged 
 for guaranteeing the credit of a person or firm to whom goods are 
 sold. This function is sometimes undertaken by banks. 
 
 Delivery Order. — A negotiable document made out iyid signed by 
 the owner of goods stored at a warehouse or dock, authorizing 
 the delivery of such goods. 
 
Glossary of Financial Terms 17 < 
 
 Demand Drafts. — A bill of exchange payable on presentation. It 
 does not need acceptance. In Great Britain "at sight bills" 
 are payable on demand. (Section 23, B.E.A.) 
 
 Demurrage. — (1) The charge made by transportation companies 
 when vessels or railroad cars are detained beyond a stipulated 
 time for loading or unloading freight. 
 
 (2) The charge of 13^2 d. per ounce made by the Bank of 
 England for exchanging gold coins or notes for bullion. 
 
 Denominations. — In exchange the multiples and sub-multiples of a 
 monetary unit represented in the coinage or paper currency; 
 for instance, the denominations of the British Imperial System 
 are sovereign and half sovereign, in gold ; crown, half crown, 
 florin, shilling, sixpence and three pence in silver; penny, half 
 penny and farthing in copper. 
 
 Deponent. — One who makes oath as to the truth of a written instru- 
 ment. 
 
 Deposit Account. — An English banking term signifying sums deposit- 
 ed at stipulated rates of interest, withdrawals from which 
 can be made only upon giving so many days notice. Corre- 
 sponds to Savings Bank acccount. (See Current Account.) 
 
 Deposit Rate. — The rate of interest allowed by London banks on short 
 time deposits is one and a half per cent, below the bank of 
 England rate. This rate governs the amount of rebate allowed 
 on "documentary bills" retired before maturity, which are 
 rebated at a rate of one-half per cent, above the deposit rate. 
 During 1915, war conditions made this margin more elastic 
 according to requirements of the banks. 
 
 Depreciated Currency. — Paper money is a depreciated currency 
 when its purchasing power as compared with gold has fallen, 
 or in other words, when prices as expressed in paper money have 
 risen. If 100 gold dollars is equivalent to 225 paper dollars, 
 gold money is at a premium of 125% and paper money is at a 
 discount of 55 5/9% (^|^^° = 55|). Instances of this have 
 occured in South American countries where the governments 
 have issued their own notes. 
 
 Depreciation. — Diminishing value. Generally used in business to 
 signify decline in value of any property, especially buildings, 
 machinery and plant, due to continued usage, lapse of time or 
 invention of new methods and machinery. It is fundamental 
 
^ 
 
 178 Glossaey of Financiaij Terms 
 
 that a sufficient allowance for depreciation should be made in 
 every business, otherwise the fixed capital of the concern would 
 be subject to continuous impairment. 
 
 Dies Non. — A da>- upon which, owing to some particular circumstance 
 or event, no business can be transacted. A legal holiday or 
 non-juridical day. 
 
 Direct Exchange. — Exchange between two places; for instance, ex- 
 change between Montreal and Toronto or between Montreal 
 and Paris is direct exchange. (See Indirect Exchange.) 
 
 Disability. — Want of qualification. Incapacity to do a legal act. 
 
 Disaffirment. — The annulling or cancelling of a voidable contract. 
 
 Discount. — The amount charged to co\er the interest of money 
 advanced on a bill or other document not presently due. This 
 amount or discount is generally deducted from the face amount 
 of a note or draft by a bank. The term discount is also applied 
 to a deduction from the amount of an invoice or account for 
 payment before due. 
 
 Dishonour. — The non-acceptance of a draft or the non-payment of 
 a bill of exchange at maturity or of a cheque when presented to 
 the bank upon which it is drawn. 
 
 Dividend. — (1) Something to be divided. 
 
 (2) That portion of the profits of a company that is periodically 
 distributed among its shareholders. When a company pays no 
 dividends at one or more of the periods, it is said to have 
 "passed" its dividend. 
 
 (3) The distribution that is made to the creditors of a com- 
 pany or other concerns, bankrupt or in liquidation. (See 
 Interim Dividend.) 
 
 Distraint or Distress. — The act of seizing goods for rent due. 
 
 Dividend Warrant. — A cheque issued by a corporation in payment 
 of its dixidend. (Section 7 B.E.A.) 
 
 Documentary Bills. A term used to indicate a set of bills of ex- 
 change having attached to them a letter of hypothecation, bill 
 of lading, invoice or insurance policy as security. (See Hypothe- 
 cation, Letter of.) 
 
Glossary of Financial Terms 
 
 179 
 
 J 
 
 Dollar Exchange. A bill of exchange drawn in a foreign country 
 and payable in America in dollars, or drawn in America in 
 dollars and payable in a foreign country. 
 
 Domestic Inland Exchange. — A term applied to the transfer of 
 funds between points in the same country, generally by means 
 of cheques and bank drafts. Inland exchange is calculated 
 in only one kind of money. No conversion is necessary as in 
 the case of foreign exchange and the difference between the 
 amount remitted to the payee and the amount paid for a draft 
 is in the form of a discount or premium on the amount; this is 
 called exchange (q.v.). The total transactions in domestic 
 exchange may be said to act as a clearing house between differ- 
 ent sections of a country, whereas foreign exchange operates a 
 clearing house between nations. 
 
 Domicile. — (1) The place where a man has his permanent residence 
 or home, and to which he intends to return if absent. 
 
 (2) A term used to signify the place at which a draft, 
 promissory note, etc. is made payable, that is, if a draft is 
 made payable at a certain place, it is domiciled at that address. 
 
 Donatio Mortis Causa. — A gift of personal property made in con- 
 templation of death. Should the donor recover, he may re- 
 voke the gift and again take possession of what was given. 
 
 Double Name Paper. — A draft or promissory note that is endorsed, 
 and has two independent names on it. The term "two name" 
 paper is sometimes used. 
 
 Double Standard. — (See Bimetallic Standard.) 
 
 Dower. — The right of a widow to the use or ownership of some portion 
 of the real estate owned by her husband. 
 
 Draft. — (See Bill of Exchange.) 
 
 Drain of Bullion. — A serious loss or drain of gold from a country 
 by export. This, if not checked, would affect the bank re- 
 serves and leave the supph' insufficient to meet the require- 
 ments of trade. 
 
 Drawee. — The person upon whom a draft is drawn. He incurs no 
 liability until he has accepted, and he is then referred to as the 
 acceptor. (Sections 18, 20, 127 B.E.A.) 
 
ISO Glossary of Financial Terms 
 
 Drawer. — The person who draws (issues) a draft or other order to 
 pay money. 
 
 Drawback. — When used with reference to customs business, refers to 
 the refund of duty on locally manufactured goods, where an 
 excise duty has been levied for their manufacture, or on im- 
 ported goods, when such goods on which the duties have been 
 levied are exported instead of being used within the country. 
 Excise duty is levied on such articles as distilled spirits, fer- 
 mented licjuors, tobacco, etc., which are manufactured within 
 the country for home consumption. 
 
 Drayage. — Charges for hauling or delivery of goods on drays. 
 
 Due Bill. — An acknowledgment of debt indicating a promise to pay 
 on demand, no time being stated. 
 
 Duplicate. — A Copy. 
 
 Duties. — Or Customs levied on imported goods are of two kinds. Ad 
 Valorem and Specific. Ad Valorem Duty is a certain per 
 cent, levied on the \'alue of the goods. Specific Duty is a 
 tax that is assessed on quantities, and maybe a certain number 
 of cents per pound, per foot, per yard, per gallon, or in what- 
 ever other form the article of substance is. This is done with- 
 out reference to the value of that on which the dutv is levied. 
 
 E. E errors excepted, 
 
 E. & O. E errors and omissions excepted, 
 
 e. g for example, 
 
 etc and others; and so forth, 
 
 et al and others, 
 
 exch exchange, 
 
 ex. d. or x/d ex dividend, 
 
 ex. cp. or X cp ex coupon. 
 
 Eagle. — The standard gold coin of ihc United Stat(^s, ten dollars 
 weighing 258 grains, nine tenths fine (232.20 grains fine gold). 
 (See Mint Gold.) 
 
Glossary of Financial Terms 181 
 
 Earmarked. — This word is used in London in reference to gold that 
 is held in the vaults of the Bank of England on behalf of a 
 customer, and is therefore not the property of the bank, who 
 is simply bailee. 
 
 Earnest or Earnest Money. — A sum of money, usually a nominal 
 amount, given as evidence of a concluded bargain. 
 
 Easement. — A privilege which the owner of one adjacent property 
 has over the adjoining property. 
 
 Effects. — Money and personal property of every kind. 
 
 Elastic Currency. — When the volume of a note circulation auto- 
 matically contracts and expands according to the demands of 
 business, the system is said to be elastic. Dunbar defines it 
 as a "responsiveness to present increase or diminution of de- 
 mand — the power of adaptation to the needs of the month, the 
 week or the day, whether rising or falling." Leslie M. Shaw, 
 late Treasurer of the United States, says: "The only elastic 
 currency known to man is one based on asset currency." 
 
 V Embargo. — A stoppage of trade between certain ports by authority. 
 
 Emblements. — Growing crops of any kind produced by labour and 
 expense. 
 
 Emergency Currency. — Is the name applied to currency for tempor- 
 ary use during periods of special demand or in times of money 
 stringency or financial panic. During crop moving time 
 (September 1st to February 28th) the Canadian chartered 
 banks are permitted to issue an emergency currency to the 
 extent of 15% of their combined paid-up capital and reserve 
 fund. 
 
 Eminent Domain. — The right of the sovereign power or state to 
 take private property for public use. 
 
 i Endorse. — In a specific sense, to af^x one's name to a cheque, bill of 
 exchange or other negotiable instrument in order to transfer 
 or guarantee it. According to ordinary practice, but not neces- 
 sarily, the signature in such case appears on the back of the 
 document. 
 
 Used in a general sense, to write anything on the back of 
 a document of any description or to ratify or confirm any- 
 thing. (Sections 60, 62, 63, 131 B.E.A.) 
 
182 Glossary of Financial Terms 
 
 Endorsee. — The one in whose favor a note, bill or cheque is endorsed 
 by the endorser. 
 
 Endorsements, Endorsation. — (1) The act of endorsing or writ- 
 ing on a negotiable instrument in order to transfer or guarantee 
 it. The endorsement is generally written on the back of 
 the instrument as the most convenient place for the purpose. 
 (2) The signature or other writing on the back of a bill 
 of exchange, promissory note, cheque, etc. 
 
 Endorser. — The person by whom a bill of exchange or other negoti- 
 able instrument is endorsed to complete the negotiation. 
 Delivery of the instrument is essential. 
 
 Entail. — (1) Property limited in passing to a particular heir or heirs. 
 
 (2) To limit the succession of real property, that * is to 
 
 curtail the passing of real property on the death of the owner. 
 
 Equitable Mortgage. — A transaction which has the intent but not 
 the form of a mortgage and which in a court could be enforced 
 to the same extent as a mortgage; for instance, a loan on the 
 faith of a deposit of title deeds. 
 
 Equity. — Equity in a loan is the difference between the market value 
 of the securities pledged as collateral and the amount borrowed. 
 Equity in a property is the surplus value which would re- 
 main if a property' had been disposed of for the satisfaction of 
 the liens thereon. 
 
 Equity of Redemption. — The right which a mortgagor has to re- 
 deem his estate after the mortgage becomes due. 
 
 Escheat. — Property which falls to the crown owing to failure of heirs 
 or through forfeiture. 
 
 Escrow. — A document completely executed under seal, but delivered 
 to a third person to be surrendered by him to the j^erson whom 
 it purports to benefit (the grantee) and to take effect only when 
 certain specified conditions shall ha\e been satisfied. 
 
 Estoppel. — A rule of law which precludes a man from denying certain 
 facts or conditions in consequence of his pre\'ious conduct or 
 allegations. 
 
 Exchange. —(1) The system on which bills (chiefly foreign) are dealt 
 in and valued. In a broader sense, the operation by which 
 settlements are effected between different countries (foreign 
 
Glossary op Financial Terms 18 
 
 exchange) or between points in the same country (inland ex- 
 change) for goods, securities, etc., purchased. 
 
 (2) The charge made by a bank in buying or selHng inland 
 exchange, generally made in the form of a percentage on the 
 amount. ' Such charge should be sufficient to cover the ex- 
 penses of the transfer, and give the bank a reasonable profit 
 on the transaction. There are four elements of expense to be 
 
 considered: — 
 
 (i) Postage and the actual cost of stationery, clerical 
 
 work, etc.; 
 (ii) Interest for the time the amount is outstanding; 
 (iii) (a) If the transaction is with a branch, the cost of 
 the ultimate transfer of funds between branches; 
 (b) If with a correspondent, the actual charge made 
 by the correspondent; 
 (iv) Profit to bank. 
 
 In the case of foreign exchange, all these items including 
 stamps (if any), are allowed for in making the rate of exchange. 
 
 Exchange, Par of.— (See Par of Exchange.) 
 
 Ex Dividend.— (See Cum Dividend.) 
 
 Execution.— (1) A written command issued to a sheriff or other 
 officer after a judgment directing him to enforce it. 
 
 '?) The act of signing a certain legal instrument, or giving it 
 the confirmation required to make it valid. 
 
 Execuior.— A person named in a will to carry out its provision. 
 
 Executory Contract.— On^ in which something remains to be done 
 on one or both sides. 
 
 Ex Officio.— By virtue of office. 
 
 Ex Parte.— On behalf of. An instance of this is when a certain pro- 
 ceeding is taken by one party when the other or others are not 
 present. 
 
 Expected to Rank.— A term used in insolvency to indicate the amount 
 of money that will be actually owing under a certain claim 
 when the estate comes to be liquidated. 
 Express Money Order.- An order issued by an express company. 
 It resembles a cheque or draft in some respects, but, as it 
 orders an act to be done in addition to the payment of money, 
 the holder is not protected by the provisions of the Bills of 
 Exchange Act. 
 
184 GliOSSARY OF FiNANCLVL TeRMS 
 
 F 
 
 i 
 
 f. or fcs Francs, 
 
 ' f. a. a free of all average. 
 
 f. a. s free along side ship, 
 
 f. g. a free of all general average, 
 
 fo., fol folio, 
 
 f. o. b free on board (See Loco.), 
 
 F/P fire policy, 
 
 f. p. a free of particular average, 
 
 frt freight, 
 
 ft foot or feet. 
 
 Face. — The amount for which a bill is drawn, a note is made out, stock 
 certificate is made out, etc. 
 
 Facsimile. — A true copy, a copy without variation. 
 
 Factor. — A person who, while carrying on business in his own name 
 and not in that of his principal, buys and sells goods for another. 
 He usually has possession of the goods in which he deals, thus 
 differing from a broker. He also possesses wider powers. 
 When a factor accompanies on a voyage a cargo he is 
 employed to sell, he is called a Supercargo. 
 
 Failure. — The suspension of payment of a commercial firm or indi- 
 vidual. 
 
 Falling Exchange. — (See Favourable Exchange.) 
 
 Favourable Exchange. — When foreign exchange is quoted in dollars 
 or cents per foreign unit (fixed exchange) a falling rate 
 is favourable to (in favour of) Canada and unfavourable to 
 (against) the country where it is payable. For instance, ex- 
 change in Holland is quoted at so many cents per guilder, 
 and when the rate is falling a guilder costs fewer cents. Low 
 exchange also signifies that the balance of indebtedness is 
 in favour of Canada. 
 
 Conversely a rising quotation in a fixed exchange signifies 
 that the exchange situation is Unfavourable to Canada and 
 favourable to the foreign countr\-, as the foreign unit costs more. 
 
Glossary of Financial. Terms 185 
 
 For instance, exchange in London is quoted at so many dollars 
 and cents per pound sterling, and when the rate is rising the 
 pound costs more in dollars and cents. 
 
 When foreign exchange is quoted in foreign money per 
 dollar it is called "Movable Exchange" and a falling rate 
 signifies that the exchange is unfavourable to or against 
 Canada and favourable to the foreign country. For instance, 
 exchange on Paris is quoted in francs and centimes per dollar, . 
 and when the rate is falling, fewer francs can be purchased with 
 a dollar and the balance of indebtedness is in favour of France. 
 
 Conversely a rising quotation in a movable exchange signi- 
 fies that the exchange situation is favourable to Canada and 
 unfavourable to the foreign country as a dollar buys more 
 francs and centimes. 
 
 Canada and the United States have only movable ex- 
 change rates in connection with certain countries in the Latin 
 Union, particularly France, and it is most important to thorough- 
 ly master the fact that the higher the rate the cheaper the ex- 
 change. 
 
 Fixed Exchange (dollars for foreign unit). Falling rate 
 is favourable (fewer dollars given for foreign unit). Rising 
 rate is unfavourable (more dollars given for foreign unit). 
 
 Movable Exchange (Foreign unit per dollar). Rising 
 rate is favourable (more foreign money given for dollar). Falling 
 rate is unfavourable (less foreign money given for dollar). 
 
 Fee-Simple. — A freehold estate, absolutely free and entirely at the 
 disposal of the owner. This is the highest estate in land 
 known to the English law. 
 
 Fee-Tail. — A freehold estate which must descend in a particular line. 
 
 Fiat Money. — Fiat means "Let it be made" and fiat money is paper 
 currency issued by a Government against which no gold or 
 silver reserve is held. It is simply money by decree of the 
 Government. Its use invariably leads to serious consequences 
 to any country weak enough to permit its issue. (See Gres- 
 ham's Law.) 
 
 Fictitious Payee. — The insertion in a bill or cheque of the name of 
 a person to whom the instrument is not intended to be paid. 
 (Section 21-25 B.E.A.) 
 
I'-iB Glossary of Financial Terms 
 
 Fieri Facias (Fi. Fa.). — An order of a court entitling a judgment 
 creditor to ha\c deli\"ered to him or sold for his benefit personal 
 proper! \ helorgirg to the debtor. 
 
 Finance. — The science of money and money affairs, the systematic 
 control and regulation of the rexenues ard expenditures of a 
 state and of its banking, financial and allied legislation. The 
 term is generally applied in commerce to the raising of money 
 by bond issues, etc., and the providing of funds to carry out 
 public and commercial undertakings. 
 
 Finance Bill. — A foreign bill of exchange drawn for the purpose of 
 making available the funds obtained in connection with a 
 financial transaction as an issue of stocks or bonds, etc. The 
 term is also applied to a long bill of exchange drawn by a 
 banker in one country on a banker in another, generally against 
 balances or securities in the hands of the latter. The privilege 
 of drawing such bills is useful in enabling bankers to anticipate 
 a change in the rates of exchange. (See Foreign Exchange 
 Loan.) 
 
 Fineness. — In reference to gold and silver coins fineness means the 
 proportion of pure metal contained therein and is usualh- ex- 
 pressed in thousandths. A Canadian gold piece is .900 fine 
 or nine-tenths pure metal and one-tenth alloy. A sovereign 
 is .916% fine, or eleven-twelfths pure metal and one-twelfth 
 alloy. 
 
 First and Second Exchange. — (See Bill of Exchange.) 
 
 First Class Paper. — In the money market a phrase applied to drafts, 
 promissor\' notes, etc., which bear the names of well known 
 banks or houses as acceptors or endorsers. 
 
 Fixed Assets. — (See Assets.) 
 
 Fixed Charges. — Expenses accruing periodically in determineMJ 
 amounts which do not \ar\- nnicli with the \()lume ot 
 business done by a company in the particular period, but re- 
 main more or less fixed and unavoidable. The principal fixed 
 charges are interest on mortgages, bonds and debentures, 
 rent, salaries, taxes and insurance. 
 
 Fixed Rate of Exchange. — When foreign exchange is quoted in the 
 home currency per foreign unit it is called Fixed Exchange. 
 For instance, exchange on London is (juoted in Canada in 
 
Glossary op Financial Terms 187 
 
 dollars and cents per pound sterling. The latter is the fixed 
 basis and its value fluctuates in dollars and cents and the higher 
 the quotation the higher the cost of such exchange. When the 
 rate is quoted in foreign units per home unit it is called Mov- 
 able Exchange. For instance, exchange on Paris is quoted in 
 francs and centimes per dollar. The dollar is the basis and the 
 fluctuation occurs in the foreign currency, and the higher the 
 quotation the lower the cost of the exchange in Canada. (See 
 Favourable Exchange.) 
 
 Floating Money. — Floating or surplus money is a term used to 
 designate funds temporarily free and available for call and 
 other short term loans pending its more permanent employ- 
 ment. As such money is returnable on short notice, it com- 
 mands but a low rate of interest. 
 
 Forced Currency. — Depreciated paper made legal tender by law 
 (fiat money) — -the currency is forced into circulation. Where 
 fiat money circulates gold is at a premium. 
 
 Foreclosure. — The legal process of cutting off the right or interest of 
 the mortgagor in mortgaged premises. 
 
 Foreign Exchange. — The system by which one country discharges 
 its debt to another country is called foreign exchange. This 
 indebtedness may arise from shipments of merchandise, trom 
 money loaned or invested abroad or from interest on such 
 funds, from payments by one country to another for freight 
 and insurance or the expenditure of its citizens travelling abroad. 
 Sometimes the balance of payments, as it is called, is with one 
 country, sometimes with the other, and exchange rates will 
 rise and fall accordingly. There are, of course, many other 
 reasons which afi^ect the exchanges, but the above are the prin- 
 cipal factors in the fluctuations. The rate of exchange is 
 best defined as the price of the money of one country reckoned 
 in the money of any other country. In speaking of the rate 
 of exchange between Great Britain and the United States, for 
 instance, the quotation 4.8650 means that in New York a 
 draft drawn on London can be bought at the rate of §4.863/^ 
 for each pound sterling in it. 
 
 Foreign exchange differs from domestic or inland exchange 
 (q.v.) in two important respects; in the first place it involves 
 the conversion of money of one country into that of another, 
 and secondly it involves to a much greater degree the considera- 
 tion of interest for the time lost in transmission. 
 
188 Glossary of Financial Terms 
 
 Foreign Exchange Loan. — The loan of a bill of exchange, which the 
 borrower can use either to remit abroad in payment of a debt, 
 or which he may sell with the view of using the proceeds local- 
 ly. Security is generally deposited with the lender. 
 
 When the loan matures the borrower retires it by deliver- 
 ing a sight sterling bill of exchange or he may pay the lender 
 in cash at the current rate of exchange for sight sterling bills. 
 In this way, the risk of exchange fluctuations rests entirely 
 with the borrower. (See Finance Bill.) 
 
 Foreign Exchange Quotation. — Exchange quotations are generally 
 given in two columns, the first column (B) giving the price 
 offered by buyers, and the other column (S) giving the seller's 
 price, the one expressing the demand and the other the supply. 
 B gives the lower quotation, as naturally the buyers offer a 
 price as low as possible, whilst the sellers try to obtain the 
 highest price. The real or trading quotation is generally 
 somewhere between the two. 
 
 There are two classes of quotations, the "posted rate," 
 which is used principally for small amounts and the "actual 
 rate" or wholesale rate used between bankers and brokers for 
 large transactions. As a rule, however, the rates for \cr\- 
 large transactions are a matter of individual negotiation, 
 owing to frequent changes in conditions during the day, and 
 the rates are seldom announced in time to be of much use, ex- 
 cept to shoAv the general trend of exchange. 
 
 Foreign Postal Money Orders. — Money order issued by the Post 
 Office for the transmission of a sum abroad. 
 
 Foreign Postal Remittances. — A form of remittance (also called 
 mail remittance), which meets the requirements of European 
 emigrants and facilitates the transfer of money to places where 
 banking facilities are limited. By this system, a bank requests 
 its correspondent in another country to remit a certain sum 
 to a specified person in that country, enclosing a draft or other 
 cover for the amount and commission. The correspondent, 
 on receipt, forwards the amount to the beneficiary by registered 
 mail or local money order. A Foreign Postal Remittance blank 
 comprises four forms: — 
 
 1. The selling bank's record of the transaction, 
 
 2. The advice to the correspondent giving full particulars 
 
 and instructions, 
 
Glossary of Financial Terms , 18^ 
 
 3. Receipt for the remitter, ■ • ^ 
 
 4. Advice to the payee of the remittance. This is printed 
 
 in several foreign languages and handed to the 
 remitter to mail with his letter. 
 Forward Exchange.-A term used to express buying or selling foreign 
 exchange for future delivery. In this way the rate is fixed 
 at the time the transaction is made and the element of risk 
 from a falling rate of exchange is eliminated. For instance, in 
 Tuly a manufacturer in Canada accepts an order for goods to 
 be manufactured and shipped to England before 15th October. 
 Knowing from experience that a change in the rate of exchange 
 in October might make serious inroads into his profits, he asks 
 his bank to quote him a rate for the amount of his shipment, 
 and contracts to deliver the bills of exchange to the bank in 
 October. In this way the rate is definitely fixed. 
 
 The bank can protect itself in two ways: first, by selling 
 its own bills to fall due in London in October or, secondly, in 
 its turn to sell London exchange for future delivery. As far as 
 the obligation is concerned the latter alternative amounts to 
 the same thing, except that no money transaction is involved 
 The decision of the bank is governed by the rate of interest 
 obtaining in London in July. It is obvious that dealing in 
 forward exchange is not necessarily based on an actual prospec- 
 tive transaction. 
 Fractional Currency.-Subsidiary coins or paper money used for 
 
 change, 50 cents, 25 cents, 10 cents, 5 cents, and 1 cent. 
 Free Coinage.-The unlimited coinage with or without a nominal 
 charge of bullion taken by individuals to a Mint or other 
 Government depository. The term now applies only to gold 
 as the free coinage of silver has practically, if not legally, been 
 abolished in all countries. When bullion is bought and coined 
 by a Government itself, as in the case of silver, the operation 
 is termed "Coinage on Government account," and the profit 
 resulting or seigniorage accrues to the country. 
 Free Credit.— (See Open Credit.) 
 
 Free from Responsibility.-When one person holds a second person 
 free from responsibility in connection with any transaction, it 
 means that the latter is not liable for any loss or difficulty which 
 may arise through forgery or technical defects connected with 
 the transaction, provided he exercises ordinary business pre- 
 
190 Glossary of Financial Terms 
 
 cautions. The second person acts simply as an agent for the 
 first person, and any loss has to be borne by the first person. 
 The correspondents of a bank are usually held free from 
 responsibility in making payment under a telegraphic transfer, 
 provided the check (test) word of the code message is in order, 
 and the correspondent uses ordinary business precautions 
 and judgment in paying over the money. 
 
 French Gold. — In specie transactions, gold of the I.atin Union 
 countries is known as "French Gold" to distinguish it from 
 "So\-ercigns" and "Eagles" and includes: — 
 
 France, Belgium and Switzerland, 10 and 20 franc pieces; 
 
 Italy, 10 and 20 lire; 
 
 Greece, 10 and 20 drachma pieces; 
 
 Servia, 10 and 20 dinar pieces; 
 
 Roumania, 10 and 20 lei pieces. 
 
 The 20 peseta pieces of Spain, the l}/2 rouble pieces of 
 Russia and the 100 franc pieces of Monaco are occasionally in- 
 cluded in "French Gold" shipments. 
 
 G 
 
 gal -. gallon, 
 
 gr (wt.) grain, also for gross. 
 
 Garbled Coin. — A term applied to coins which are withdrawn from 
 circulation in consequence of their being worn or mutilated. 
 
 Garnishee Order, Garnishment, Saisie-Arret. — A legal notice 
 served on persons who are owing money to a judgment debtor, 
 or who holds goods belonging to him, warning iIumu not to 
 part with such money or goods. When a garnishee order is 
 served on a bank against a customer's balance, tlie whole 
 account, including any collections, etc., on hand, is tied up and 
 no withdrawals can be made from the account so long as the 
 order remains in force. The term used in the Pro\ince of 
 Quebec for garnishee order is saisie-arret. 
 
 Giro Conto. — The Imperial Reichsbank of Germany transfers money 
 irom one branch to another free of charge for clients who carry 
 satisfactory balances. These are known as Giro Conto trans- 
 fers. In addition to the convenience to the customers, the 
 practice evades the stamp dul\- on cheques. 
 
Glossary of Financial Terms 191 
 
 Gold Exporting Point. — (See Specie Points.) 
 
 Gold Importing Point. — (See Specie Points.) 
 
 Gold Standard. — A gold standard exists in every country where 
 gold is made the legal measure of value. (See Bimetallic 
 Standard.) Even in silver standard countries domestic trade 
 is based on silver at its bullion value, which value in turn is 
 based on the outside commerce of the country estimated in 
 gold. Gold, therefore, is practically the standard of the 
 world, adopted as such by law as well as custom in all the 
 leading commercial nations and accepted, in fact, by every 
 other country. 
 
 Good Delivery. — Bonds or share certificates which comply with the 
 rules of the stock exchange as to negotiability. 
 
 Good Faith. — Honest action, whether it is done negligently or not. 
 (Section 3 B.E.A.) 
 
 Goodwill. — Benefit arising from the fact that persons used to trad- 
 ing or doing business with a particular firm will continue to 
 do so. It is an intangible property subject to transfer. (See 
 
 Assets.) 
 
 Government Stock. — This term refers to the issue of securities by 
 governments, and the form of security would be very much the 
 same as we have already described in connection with deben- 
 ture stock, being redeemable only at the will of the Govern- 
 ment. These may also be issued for any certain number of 
 years, interest being payable on the interest dates throughout 
 the period. Some municipalities, also, put out a forpi of muni- 
 cipal bond or debenture that is known as Terminating Stock. 
 These will be issued for a definite period, but instead of having 
 coupons attached for the holder to clip off and present for 
 payment of interest, the interest is paid by warrant. 
 
 Grain. — A pound avoirdupois contains 7,000 grains and a pound troy 
 contains 5,760 grains. Troy weight is used by the British and 
 United States Mints in weighing gold and silver, while the metric 
 or decimal system is used by other nations. 
 
 1 grain (gr.) = .06579895 grammes, 
 
 24 grains=l pennyweight (dwt.)= 1.55517481 grammes, 
 20 dwts. =1 ounce (oz.) = 31.103496 grammes, 
 
 12 oz. =1 pound troy =373.241954 grammes. 
 
192 Glossary of Financial Terms 
 
 Grain Bill. — A draft drawn against a buyer or assignee of a shipment 
 of grain. Generally drawn at seven days' sight with documents 
 
 attached. 
 
 Gramme. — The unit of weight in the metric system (q.v.) equals 
 15.43234874 grains troy. 
 
 Greenback. — A legal tender note of the United States so called be- 
 cause its back is printed in green. Greenbacks were authorized 
 by the Act of 25th February, 1862, as a war revenue measure; 
 they depreciated to 35 cents on the dollar in 1864, and stood 
 as an unpaid forced loan until 1879. The amount then cur- 
 rent, $346,681,016, was authorized for permanent circulation. 
 
 Gresham's Law. — An economic law expounded by Sir Thomas Gres- 
 ham. Master of the Mint in Queen Elizabeth's reign, "when 
 two sorts of coin are current in the same nation of like value 
 by denomination, but not intrinsically, that which has the 
 least value will be current and the other as much as possible, 
 will be hoarded." In other words, bad money drives out good. 
 The law is equally applicable to paper money; inconvertible 
 notes will drive out or cause to be hoarded coin or convert- 
 ible notes. 
 
 Gross Profit. — The excess of selling price of goods over their pur- 
 chase price laid down or production cost. 
 
 Gross Weight. — Weight of goods including packages or the con- 
 veyance in which they are carried. 
 
 Ground Rent. — The rent paid to a landlord for the privilege of 
 building upon his land. The lease is granted for a certain 
 number of years and on the termination thereof, the buildings 
 which haxe been erected become the property of the landlord. 
 
 Guarantee, Guarantee Bond.^An undertaking by one person to 
 be responsible for the debt or contract of another. A guaran- 
 tee is only enforceable in accordance with the strict meaning 
 of its terms, and is a dangerous form of security, liable to be 
 voided by what may appear to be a most tri\ial incident not 
 affecting in any way the equities of the situation. (See Del 
 Credere.) 
 
 Guarantor. — The person who gives a guarantee. 
 
Glossary of Financial Terms 193 
 
 H 
 
 hhd hogshead. 
 
 Hire Purchase. — An arrangement by which it is agreed that the 
 property in certain goods is to be transferred in consideration 
 of a number of periodical payments, the property in the goods 
 remaining in the vendor until all the payments have been 
 made. 
 
 Holder of a Bill of Exchange. — A bearer, payee or endorsee in 
 possession of a bill of exchange, cheque or promissory note. 
 (Section 2 (g) B.E.A.) 
 
 Hypothecation, Letter of. — A certificate attached to a docu- 
 mentary bill of exchange signed by the drawer describing the 
 nature of the shipment, etc., and stating in effect (1) that the 
 bill of lading is lodged as collateral security for the acceptance 
 and payment of the draft, (2) that in case of dishonour, the 
 holder is authorized to dispose of the goods and apply the 
 proceeds towards payment of the draft and expenses incurred, 
 (3) that the drawer holds himself liable for any deficiency, and 
 agrees to pay same on demand. 
 
 When an exporter sells a number of bills of exchange to a 
 bank, a general or blanket hypothecation certificate is given 
 to apply to any or all bills of exchange purchased from him. 
 
 A letter of hypothecation, may, of course, be given to cover 
 anv form of securitv. 
 
 I 
 
 ib "ibid" (Latin ibidem) in the 
 
 same place. 
 
 id (Latin idem) the same, 
 
 i.e (Latin id est) that is, 
 
 inc., incor incorporated, 
 
 ins insurance, 
 
 inst. . instant, of the present month, 
 
 int interest, 
 
 inv invoice. 
 
194 Glossary of Financial Terms 
 
 In Case of Need. — (See Case of Need.) 
 
 Inconvertible Paper Money. — Paper money which is simply a pro- 
 mise to pay and without a fund of gold or silver pro\ided for 
 its redemption. This class of paper money usually depreci- 
 ates in value, since its eventual redemption is uncertain. In 
 reality the paper is at a discount, though it is generally said that 
 under such circumstances gold is at a premium. The credit of 
 a country even though supported by ample assets of a fixed 
 nature, is not sufficient to maintain its notes at par unless an 
 adequate gold reserve is also held. (See Fiat Money.) 
 
 Indemnity, Letter of. — In a specific sense, a letter given to a bank 
 to guarantee it against loss by reason of some defect, latent or 
 otherwise, in a cheque or draft, such as an irregular endorse- 
 ment, etc. When a bank draft or accepted cheque is lost, a 
 letter of indemnity for twice the amount is required before a 
 duplicate is issued. In a general sense, a letter of indemnity 
 may be given to anyone who guarantees anything. 
 
 Indent for Goods. — The commercial name of an order for goods, 
 giving full particulars as to terms and conditions upon which 
 it is given. 
 
 Indenture. — A contract under seal. A written agreement between 
 two or more parties. Several copies of such agreements were 
 formerly written on one piece of parchment, and the parch- 
 ment then cut irregularly (indented) so that the edges of the 
 separated copies fitted exactly into each other, thus making 
 fraud more difficult. 
 
 Index Number. — A number obtained by comparing the ratio of the 
 wholesale prices of representative commodities at any time 
 with the prices of the same staples during a certain year or 
 period of years, the latter being adopted as a standard and its 
 index number is therefore fixed at par. 
 
 Index numbers are most useful in a stud)' ol the trend of 
 prices, and the movement of gold. 
 
 .There are various index numbers in use, calculated on difter- 
 ent fixed periods and lists of staples, etc. The best known 
 index numbers are as follows: — 
 
J 
 
 Glossary op Financial Terms 195 
 
 Period Number of Staples 
 
 London Economist 1845-1850 22 
 
 Sauerbeck 1867-1877 45 
 
 Dunns Monthly 350 
 
 Bradstreets " 107 
 
 Department of Labour, 
 
 Canada 1890-1899 230 
 
 A useful and interesting explanation of index numbers will 
 be found in "Wholesale Prices in Canada," by R. H. Coats, 
 B.A., published by the Department of Labour. 
 
 Indirect Exchange. — Exchange operations may be carried out in 
 two ways, namely, by direct exchange (q.v.) which is effected 
 by a direct remittance between the two countries concerned, or 
 by indirect or circuitous exchange, which is effected by -re- 
 mittances through a country or countries other than those 
 immediately concerned. For instance, a bank or broker in 
 New York desiring to remit 10,000 marks to Berlin, might find 
 it advantageous to buy a bill drawn on Paris and send it to his 
 Paris correspondent, with instructions to purchase a bill on 
 Berlin, or he might send the bill to Paris, and instruct his Berlin 
 correspondent to draw on Paris. Again, he might remit to 
 London in the first place, then to Paris, and finally to Berlin. 
 To conduct operations in indirect exchange successfully, it is 
 essential that the banker shall be in daily, if not hourly, touch 
 with the varying conditions of the foreign exchange markets, 
 and must cable his correspondents as to his intentions without 
 delay, so that they will be prepared to carry out the trans- 
 action. Indirect exchange transactions are confined princi- 
 pally to large financial centres, and require experience and close 
 study of financial conditons. 
 
 Indirect exchange is also known as Arbitration of Ex- 
 change and the rate obtained the Arbitrated Rate of Ex- 
 change. 
 
 Indorse. — (See Endorse.) 
 
 Indorsement. — (1) The act of indorsing or writing on the back of a 
 negotiable instrument in order to transfer or to guarantee it. 
 
 (2) The signature or other writing on the back of a bill of 
 exchange, promissory note, cheque, etc. Same as endorse- 
 ment (q.v.). 
 
 Indorser. — (See Endorser.) 
 
196 Glossaky of Financial Terms 
 
 In Exchange. — When these words are added to the face of a draft, 
 the amount of the draft must be paid by a remittance on the 
 place from which the draft was drawn. For example, a draft 
 drawn in Montreal on a person in Toronto "in exchange," 
 means that at maturity the drawee in Toronto delivers in 
 I payment a bank draft on Montreal. Bills of exchange drawn 
 
 in this manner are non-negotiable instruments, not being pay- 
 able in money only, therefore the method is seldom used. The 
 expression " in exchange " differs materially from "with 
 exchange." (q.v.) 
 
 Inland Bill. — A bill of exchange drawn and payable within a country, 
 or drawn within a country upon some person resident therein, 
 domestic exchange. (Section 25 B.E.A.) 
 
 Instant. — Present; current. Usually used to indicate the present. 
 
 Insurable Interest. — Such as interest in the thing insured that the 
 person possessing the interest may be insured to that extent. 
 
 Interest. — That which through lapse of time, accrues to the increase 
 of indebtedness for money loaned, frequently also described as 
 the amount paid for the use of money, better perhaps "paid or 
 owing" for the use of money. 
 
 Interim Dividends. — Dividends declared at some intermediate date 
 during a financial period and provided either out of current 
 profits or out of the undivided profits of the preceding period. 
 
 Interior Movement of Money. — The movement or flow of money 
 (credit and gold) within a country to and from the financial 
 centre. In the United States for instance, the interior mo\e- 
 ment of money is said to be in favour of New York when more 
 money is coming into New York from the rest of the country 
 than is being withdrawn from New York. The movement is 
 unfavourable when the reverse is happening. 
 
 In Transitu. — In course of transmission, on the way. 
 
 Inventory. — A list in detail of items of stock in trade or other property 
 with their value. 
 
 Investment. — The giving out of money in the purchase of property, 
 goods, etc., usually with a \iew to revenue therefrom. (See 
 also Capital.) 
 
 Invoice. — A statement in detail of goods bought or sold. 
 
Glossary of Financial Terms 11! 7 
 
 I. O. U. — "I owe you." An acknowledgment or memorandum of a 
 L^Mit debt. May be used in a court as evidence of indebtedness, 
 but is not a negotiable instrument. 
 
 J 
 
 J/A joint account, 
 
 Jan January, 
 
 J. P Justice of the Peace, 
 
 jr junior, 
 
 Ju June, 
 
 Jul July, 
 
 J journal. 
 
 Jobber. — One who sells to retailers goods that he buys from manu- 
 facturers or importers. 
 
 Joint and Several. — A term used to describe the liability of persons 
 who have jointly and severally signed a note or other document, 
 and are therefore liable for the full amount to the payee and 
 all possible holders, though as between themselves they are 
 only liable proportionately. A note signed by several obligants 
 reading, "We jointly and severally promise to pay" or "I 
 promise to pay" is a joint and several note. If the holder 
 found it necessary to sue, in order to recover payment, he could 
 proceed against all the makers jointly or against any one of 
 them severally. If the note read, "We promise to pay" the 
 holder would have to proceed against the makers jointly. 
 (Section 179 B.E.A.) 
 
 Joint Stock. — (See Capital Stock.) 
 
 Judgment. — An order or decree of a court enforcing a contract. 
 
 K 
 
 Kilo. — An abbreviation of Kilogram, meaning 1,000 grams. It is a 
 weight employed in the metric system, equivalent to about 
 2i lbs. In the grain trade quotations from Antwerp are 
 per 100 kilos, equal to 3.67 bushels, and from Berlin are per 
 1,000 kilos or 36.74 bushels. 
 
198 Glossaky op Financial Terms 
 
 Kite. — A colloquialism for accommodation paper (q.v.). The dealing 
 in fictitious or accommodation cheques and notes in order to 
 raise money or keep up one's credit is called kiting or kite 
 flying, and is a very dangerous form of financing, whether ac- 
 complished by means of cheques, drafts, or notes. 
 
 Knot. — A nautical mile, equal to 2028 yards or one-sixtieth of a 
 degree of latitude. 
 
 Kopeck. — A Russian copper coin equal to the hundredth part of a 
 silver rouble. The word is derived from the name of a lance, 
 as a figure of St. George with a lance in his hand was formerly 
 impressed on the coin. 
 
 Krone. — (Crown). The Danish and Norwegian unit ccjual to .2679 
 cents (100 ore), plural Kroner. The Swedish coin, though 
 equivalent in value, is spelled Krona, plural Kroner. The 
 Crown of Austria-Hungary (100 hellers) is also spelled Krone 
 (value .2026 cents) but the plural is Kronen. 
 
 L 
 
 £ Pounds sterling, 
 
 L/a letter of authorit}-, 
 
 L/c letter of credit, 
 
 ' £E Pounds Egyptian, 
 
 led ledger, 
 
 L/P life policy, 
 
 Lr Lire, (Italian currency) singular 
 
 lira, plural lire, 
 L.S (Latin Locus sigilli) place of the 
 
 seal, 
 L.S.D (Latin Librae, solidi, denarii) 
 
 jKHinds, shillings and pence, 
 
 £T Pounds Turkish, 
 
 Ltd limited. 
 
 Lac or Lakh. — An Indian term signifying 100,000 rupees. 
 
 Latin Union. — A monetary union finally ratified in November, 1893, 
 formed by the adoption of the same currency system under 
 different names by France, Belgium, Switzerland, Greece and 
 Italy. The system has also been adopted by^ Bulgaria, 
 Roumania, Servia, P'inland and Spain. 
 
Glossary of Financial Terms 199 
 
 Law Merchant, Lex Mercatoria, or Lex Mercatorum. — The 
 
 general body of usages and customs which regulate matters 
 relating to commerce. Lord Campbell says: "When a general 
 usage has been judicially ascertained and established, it be- 
 comes a part of the law merchant, which courts of justice are 
 bound to know and recognize." 
 
 Lease. — A contract giving possession of real property for a certain 
 
 time. 
 
 Legal Holidays. — Certain days appointed by law upon which it is 
 recommended that people refrain from their ordinary duties. 
 These are known also as "non-juridical days" for upon them no 
 court proceedings can be taken. (See Dies non.) (Sections 
 2 (1), 43 B.E.A.) 
 
 Legal Rate of Interest. — A rate established by law (usually 5%) to 
 apply to all cases where interest is due, but no rate has been 
 established by the contracting parties. 
 
 Legal Tender. — Such money as a creditor is obliged to receive in 
 satisfaction of a debt in terms of money of the realm. Legal 
 tender in Canada consists of: — 
 
 L Canadian, British and United States standard gold 
 coins. (Multiples and halves of the eagle.) 
 
 2. Dominion of Canada notes. 
 
 3. Canadian silver coins to an amount not exceeding ten 
 
 dollars. 
 
 4. Canadian copper or bronze coins to the amount of 
 
 twenty-five cents. 
 
 Lessee. — One to whom a lease is made. 
 
 Lessor. — One who makes a lease to the lessee. 
 
 Letter of Attorney. — Authority in writing to act in the place of, but 
 for, another. 
 
 Letter of Credit. — An order given by a banker to a correspondent 
 authorizing the latter to pay to a particular individual part or 
 all of a certain sum of money. Owing to this vagueness, a 
 letter of credit is not a negotiable instrument, and therefore 
 payment can be legally demanded only by the person who is 
 named in it. 
 
200 
 
 Glossary of Financial Terms 
 
 There are two well-known forms of letters of credit — 
 
 (1) Circular letters of credit, for use by travellers and 
 
 tourists; 
 
 (2) Commercial letters of credit for use in trade. 
 
 The purchaser of a circular letter of credit is usually re- 
 quested to sign a form of agreement and to deposit cash or 
 security for the amount of the credit. He receives in return 
 (a) the letter of credit; (b) a letter of indication in which he 
 IS required to write his signature forthwith, for purposes of 
 Identification; (c) a list of the bank's correspondents who have 
 undertaken to honour such credits. 
 
 The purchaser of a commercial letter of credit first signs a 
 letter of application giving full particulars as to the descrip- 
 tion, quantities, etc., of the goods he is importing, and the 
 terms under which the credit is to operate and the bank then 
 gives the purchaser a letter of credit to send to the exporter 
 abroad, sends a similar one to its correspondent named on the 
 face of the credit, and retains a copy for its own files. On the 
 back of the latter is an agreement as to repayment, etc., which 
 the customer is required to sign. 
 
 The exporter, on presentation of bills of lading, invoice 
 and other satisfactory proofs that the terms of the credit have 
 been complied with, obtains payment or acceptance of a draft 
 for the amount through the correspondent, and thus realizes 
 promptly on his goods. The latter retains the documents and 
 forwards them to the bank which issued the credit and, on the 
 arrival of the goods, the latter surrenders to the importing 
 customer the bills of lading, etc., either on payment of the 
 amount or against a trust receipt. 
 
 Letter of Delegation.-A letter conferring authority to collect an 
 amount due. 
 
 Letter of Hypothecation.-(See Hypothecation, Letter of.) 
 
 Letter of Indication.-The letter of indication issued with a Travel- 
 ers Circular Letter of Credit. It is signed at the time the 
 letter of credit is purchased, and is exhibited with each with- 
 drawal as a means of identification. 
 
 Letters of Administration.-An instrument issued out of a court 
 Having jurisdiction, granting power to settle the estate of a 
 person dying without leaving a will. 
 
Glossary op Financlvl. Terms 201 
 
 Letters Testamentary. — A court instrument granting power to the 
 person named as executor in a will to carry out the provisions 
 of the will. 
 
 Liabilities. — Debt owing by a person or firm; i.e., debts which they 
 are liable to pay. 
 
 Lien. — (1) A legal claim or hold on property. 
 
 The right possessed by a person who has actual or construc- 
 tive possession of another person's goods or property to retain 
 them if the owner is indebted to him. 
 
 (2) A document or bond of any kind pledging such security. 
 
 Life Estate. — An estate or interest held for the term of the life of the 
 holder (called the Life Tenant), or of another person. 
 
 Limping Standard. — A term applied to the monetary system of a 
 country, which, though nominally double standard, has sus- 
 pended the free coinage of silver without definitely adopting 
 the gold standard. France has such a standard. 
 
 Limitation, Statute of. — By limitation is meant the period of time 
 prescribed by law at the end of which: — 
 
 (1.) Title is presumed or confirmed and the ownership to 
 property is established by uninterrupted possession 
 during the prescribed period. 
 
 (2.) No action at law or suit in equity can be maintained 
 against a debtor. 
 
 Prescription does not avoid or cancel a debt, but only 
 provides that no action can be maintained upon it after a given 
 time following the last acknowledgment. This is not the case, 
 however, in the Province of Quebec, where not only is legal 
 action debarred by the Statute, but the debt is annulled, to- 
 gether with all rights and liens pertaining thereto. The length 
 of the period varies in different countries. The following shows 
 the times in which actions must be brought in the various 
 Provinces of Canada: — 
 
202 Glossary of Financial Terms 
 
 Notes and 
 
 Accounts Judgments Mortjrapes 
 
 British Columbia.. 6 years 20 years 20 years 
 
 Saskatchewan ... . 6 " 12 " 12 " 
 
 Alberta 6 " 12 " 12 " 
 
 Manitoba 6 " 10 " 10 " 
 
 Ontario 6 " 20 " 10 " 
 
 Quebec 5 " 30 " 30 " 
 
 New Brunswick... 6 " 20 " 20 " 
 
 Nova Scotia 6 " 20 " 20 " 
 
 Prince Edward Is. . 6 " 20 " 20 " 
 
 New York 6 " 20 " 
 
 England 6 " 20 " 
 
 Liquid Assets. — The commodities and properties of an undertaking 
 which can be realized upon with little or no loss of any kind. 
 (See Assets.) 
 
 Lloyds. — An association of English underwriters of marine insurance, 
 which also collects and distributes maritime intelligence through 
 its agencies throughout the world. It issues Lloyds' Register, 
 giving the rating of ships, etc. 
 
 Loco. — A term used in selling goods, signifying that the goods are to 
 be delivered at the place of sale or the place where they are 
 lying; i.e., actual local cost. There arc four other terms used 
 in this connection: — 
 
 Free on board (f.o.b.) is loco plus packing and cartage 
 
 charges to railway car or \essel. 
 Cost of freight (c. & f.), f.o.b. plus freight. 
 Cost, freight and insurance (c.i.f.), cost and freight 
 
 plus insurance. 
 Franco, cost, freight and insurance plus foreign import 
 duty and all other charges incurrcfl up to the delixery 
 of the goods at destination. 
 
 Locuin Tenens. -A person who acts as a (k'i)ut\- or substitute for 
 another. 
 
 Lombard Street. — A street in London largeh- occupied b\- banks. 
 The name is also applied to the London mor.ex market. 
 
 London Clause. Tlie name gixen to a clause inserted in a bill ol 
 lading which relieves the vessel from the payment of dock 
 charges, etc., on the cargo when landed in London, and imposes 
 it on the shipper. 
 
Glossary of Financial Terms 203 
 
 Long Dated Paper. — A foreign bill of exchange running for 60 days 
 or more is usually known as a long dated bill. 
 
 Long Exchange. — The rate of exchange quoted for a foreign bill 
 having over thirty days to run. 
 
 L.S. — An abbreviation of a Latin phrase meaning "place of the seal." 
 It frequently takes the place of a seal or denotes where a seal 
 should be affixed. 
 
 M 
 
 M (Latin mille) Thousand, o/oo, 
 
 Mar. or Mch March, 
 
 M/C marginal credit, 
 
 m. d months after date, 
 
 mdse merchandise, 
 
 Messrs gentlemen or sirs, 
 
 mfd manufactured, 
 
 mfg manufacturing, 
 
 mfr manufacturer, 
 
 mfst manifest, 
 
 M/L mortgage loan, 
 
 Mme madam, 
 
 Mmes mesdames, 
 
 mo month, 
 
 M.O money order, 
 
 Mr master or mister, 
 
 Mrs mistress, 
 
 M/S months after sight, 
 
 MS manuscript (plural MSS.), 
 
 mtg mortgage. 
 
 Mail Remittance. — (See Foreign Postal Remittance.) 
 Maker. — The signer of a negotiable instrument such as a note. 
 
 Mala Fides. — "Bad faith," the opposite of "bona fides." 
 
 Mandamus. — A writ issued by a superior court to an inferior court, 
 or to an officer, commanding something to be"done. 
 
204 Glossary of Financial Terms 
 
 Marginal Credit. — A document authorizing the addressee to place 
 a sum of money at the disposal of a person who must first follow 
 the instructions in the margin of the authority. A letter of 
 credit is a form of marginal credit. 
 
 Marked Cheque. — (See Certified Cheque.) 
 
 Market Rate of Discount. — Also known as open market rate or pri- 
 vate rate in contradistinction to the ofiicial or bank rate. Rate 
 charged by bankers, bill brokers and others for discounting 
 bills of exchange, etc. It is usually lower than the bank 
 rate, owing to competition. 
 
 Material Alteration. — (See Alteration.) 
 
 Maturity. — The date on which a negotiable instrument or book ac- 
 count becomes due. The term is of frequent use in foreign 
 exchange. When it is said that the maturities of a certain 
 • month are large, it means that an unusualy number of bills 
 fall due that month. (Sections 42 to 46 B.E.A.) 
 
 Merchandise. — Goods purchased to be sold again. 
 
 Metric System. — This system of weights and measures is now used 
 by almost every civilized nation, with the exception of Great 
 Britain, the United States, Canada, Australia and South 
 Africa. The system is so called because the metre or unit of 
 measure is taken as the base from which the units of surface, 
 capacity and weight are derived. The several units are as 
 follows : — 
 
 Metre, 
 
 unit 
 
 of 
 
 lineal measure; 
 
 Are, 
 
 1 < 
 
 
 surface 
 
 St^re, 
 
 << 
 
 
 cubic " 
 
 Litre, 
 
 i t 
 
 
 capacity, 
 
 Gramme, 
 
 i i 
 
 
 weight. 
 
 The metric system is a decimal one and a table is easily 
 constructed, Greek prefixes being used to designate multiples 
 of the unit and Latin prefixes to designate sub-multiples or 
 fractions of the unit, thus: — 
 
 Latin Milli tdW] 
 
 Centi TiTTi' For decimal parts of the unit; 
 Deci iV 
 
Glossary of Financial Terms 205 
 
 Greek Deca 10 times 
 
 Hecto 100 
 Kilo 1,000 " 
 Myria 10,000 " 
 
 For decimal multiples of the unit. 
 
 The metric system of weight with its unit gram or gramme, 
 is much used in weighing gold and silver coin and bullion, and 
 should therefore be studied by the exchange student. 
 
 10 milligrammes (mg.) =1 centigramme (eg.). 
 10 centigrammes =1 decigramme (dg.). 
 
 10 decigrammes =1 gramme (g. or gr.) 
 
 15.43234874 troy grains. 
 10 grammes =1 dekagramme (Dg.). 
 
 10 dekagrammes =1 hectogramme (Hg.). 
 
 10 hectogrammes =1 kilogramme (Kg.) 2.204621 
 
 lbs. avoirdupois. 
 1 oz. troy =31.103496 grammes or nearly 31iV grammes. 
 1 kilogram = 32. 1507265 ounces " 32A ounces. 
 
 Mille. — One thousand. A premium of one per mille (l%o) is one 
 on every thousand equivalent to 1/10 of one per cent. (1/10 
 of 1%). On the Continent of Europe per mille and its sign 
 (%o) is frequently used, and must not be confused with the 
 per cent, sign (%). 
 
 Milling. — The corrugated or milled edge of gold and silver coin; the 
 raised edge protects the design and as the coins rest upon it 
 they may be arranged in steady piles. It also tends to prevent 
 reduction by clipping or filing. 
 
 Mint. — -A place where bullion is made into coins and issued under 
 authority of a Government. 
 
 Mint Gold. — United States standard gold .900 fine, also called 
 "Eagles." (See Standard Gold.) This term would apply also to 
 Canadian gold, which is of the same degree of fineness (.900). 
 
 Mint Par. — The value of the monetary unit of one country expressed 
 in terms of the monetary unit of another country, which uses 
 the same metal as a standard of value, though the degree of 
 fineness need not be the same. The mint par is arrived at by 
 dividing the number of grains of fine gold in the one coin into 
 the number contained in the other. The sovereign, for in- 
 stance, contains 113.001597 grains of fine gold, and the Cana- 
 
206 Glossary of Financial Terms 
 
 dhxn ten dollar gold piece 23.22 grains of fine gold to the dollar. 
 The latter therefore, is worth in shillings 
 
 23.22X20 
 
 113.0016 
 
 = 4s. 1.316d. 
 
 Mint Price of Bullion. The price at which gold or silver bullion is 
 exchanged for coin at free mints. The British Mint pays 
 £3. 17s. 103^d. for standard gold (11/12 fine) and delivers the 
 coin two wrecks after receipt of the gold. The Bank of Eng- 
 land pays £3. 17s. 9d. on delivery, the deduction of a penny 
 halfpenny or demurrage, as it is called, represents 20 days' 
 interest at 3%. The United States Mint pays $800 for 43 oz. 
 (9/10) fine) and pays for it a few days after purchase. 
 
 Mint Remedy. — The extent to which coins ma>- be worn or abraded, 
 and yet be redeemed in full. A sovereign weighs 123.27447 
 grains, and the least current weight at which it can be ac- 
 cepted as legal tender is 122.500 grains, the difference being a 
 little over ^^ of 1%. The Bank of England, however, rarely 
 delivers sovereigns weighing less than 256.20 oz. to the 1,000 
 sovereigns, or a remedy of about 3 grains per soxereign. 
 
 The term mint remedy is also applied to the amount of 
 \ariation from the standard weight of fineness allowed in the 
 case of newly minted coins. The British Mint does not issue 
 a new sovereign of less weight than 123.07445 grains or of 
 greater weight than 123.47445, the remedy is thus 15 of a 
 grain either way. On the Continent, the term used is Tolerance. 
 
 The least current weight at which a ten dollar piece will 
 be accepted under the Canadian Currency Act is 256.71 
 grains (258. — 256.71 = 1.29 grain, or half of one percent.). The 
 Canadian Mint does not issue a ten dollar piece less than 
 257.60 grain in weight. 
 
 Monetary Standard. — The standard of value established by law as 
 the basis for the money of a country. Gold is now practically 
 the standard of the world, for not only do the double standard 
 countries (q.v.) restrict the coinage of silver, in order to keep 
 their silver money at a constant ratio to gold, but the silver 
 standard countries are forced to use gold as a basis of their 
 international exchange transactions. (See Currency.) 
 
 Monetary Unit. — The basis of a monctar>- system. The pound 
 ^sterling is the monetary unit of Great Britain, and the gold 
 dollar the monetarx' unit of Canada and the United States. 
 
Glossary of Financial Terms 207 
 
 Money. — Any token (made of a certain material) that by law is re- 
 cognized as a common medium of exchange and measure of 
 value in trade, and therefore passes freely in the community 
 in final discharge of debts and in full payment of commodities. 
 It must have intrinsic value or be instantly interchangeable 
 with something that has. Money best serves its purpose when 
 it is: — 
 
 1. Accepted freely by the people, 
 
 2. Easily carried about and not bulky, - 
 
 3. Easily recognized, 
 
 4. Confined to a few forms and materials, 
 
 5. Easily divisible without loss in value, 
 
 6. Easily stored and comparatively imperishable, 
 
 7. Constant in value, as otherwise loss may be incurred 
 
 in accepting it. 
 
 Gold and silver, especially the former, meet all these con- 
 ditions fairly well, and have been universally adopted as the 
 money standards. Money must not be confounded with 
 wealth. 
 
 Money of Account. — The monetary system used by the people of a 
 country to keep their accounts and reckon their transactions. 
 It has been described as the money in which people do their 
 thinking. 
 
 Money Market. — A term applied generally to the business of lending 
 money in London, New York, or other large financial centres. 
 As in other markets, the supply of and demand for a com- 
 modity are the factors which determine prices, that is, in this 
 case, the rates of interest charged. If the demand is large and 
 the supply small, rates are high, and the reverse if the supply 
 is large and the demand small. 
 
 Monometallism. — A monetary system under which the currency of 
 a country is based on a single metal, either gold or silver. Eng- 
 land and Canada have gold monometallism. (See Double 
 Standard, Bimetallism.) 
 
 Moratorium. — A Latin word signifying delay. An extension of 
 time for the payment of debts allowed under exceptional cir- 
 cumstances by the Government of a country. During the 
 Franco-German war of 1870, a French moratory law was 
 passed extending the maturity of bills for three months. In 
 
208 Glossary of Financial Terms 
 
 July and August, 1914, a number of countries declared mora- 
 tory laws on account of the great European war wliich began 
 that year. 
 
 Mortgage. — An instrument under seal pledging certain property, 
 real or personal, as security for the payment of a debt. 
 
 Mortgagee. — The person to whom the debt is owing, and in whose 
 favor the mortgage is drawn. 
 
 Mortgagor. — The debtor in a mortgage; i.e., the one who has given 
 the mortgage as security. 
 
 Movable Rate of Exchange. — (See Fixed Rate of Exchange.) 
 
 Mutual Life Insurance Company. — A company in which there are 
 no shareholders, the profits belonging entirely to the insured, 
 and di\ided among them either by cash payments, by reduc- 
 tion of premiums, or by additions, made periodically, to the 
 amounts of the policies. 
 
 N 
 
 n/a no advice, no account, 
 
 N.A non acceptance, 
 
 N.B (Latin nota bene) take notice, 
 
 n/e no effects, 
 
 N/F no funds, 
 
 N/N not to be noted, 
 
 No number, ^f , 
 
 N/0 no orders, 
 
 Nov November, 
 
 N.P notary public, 
 
 N.P.F not provided for, 
 
 N.S new style, (q.v.) in reference to 
 
 calendar. (See O.S.). 
 N.S.F not sufficient funds. 
 
 National Debt. — The funded public debt of a country, arising from 
 the borrowing by the Government for national expenditure. 
 
 Negotiable Instrument. — Bill of exchange, cheque, note or any 
 document conveying \alue that is transferable by endorsement 
 or delivery. Lord Blackburn's definition is as follows: "When 
 
Glossary of Financial Terms 209 
 
 an instrument is by the custom of trade transferable like cash 
 on delivery, and is also capable of being sued upon by the 
 person holding it pro tempore, then it is entitled to the name 
 of negotiable instrument, and the property in it passes to a bona 
 fide transferee for value, though the transfer may not have 
 taken place in market overt." 
 
 Net.— After all charges and allowances have been deducted; e.g., Net 
 Profit is the profit remaining after all charges for administra- 
 tion have been provided for. 
 
 Net Gain.— (See Net Profit.) 
 
 Net Loss. — Excess of all losses over all gains. 
 
 Net Proceeds. — The amount remaining from sales after all charges 
 relating thereto have been deducted. 
 
 New Style. — The Georgian calendar or present method of measuring 
 time. The Julian or Old Style as it is called, is now only used 
 in Russia, and is thirteen days behind the Gregorian or ordin- 
 ary calendar. The date is generally written in Russian Janu- 
 ary 1-14, the second date being the new style. In dealing with 
 Russian bills of exchange, the difference should be borne in 
 mind. 
 
 New York Exchange. — Although Canada and the United States are 
 countries foreign to each other, their exchange, on account of 
 the similarity in their monetary systems, partakes of the 
 nature of inland exchange rather than that of foreign ex- 
 change, and it follows that the dift'erence in value between the 
 two moneys is quoted as a simple percentage. The volume of 
 business transacted between the two countries is very large, 
 and on this account there is an active market throughout Cana- 
 da for New York funds. In addition to this, as New York is 
 the financial centre of the continent, all foreign exchange rates 
 throughout Canada and t^e United States are based on ^New 
 York quotations. It must always be remembered, however, 
 that Canadian quotations will differ from the original New 
 York quotations to the extent of the discount or premium on 
 New York funds. If New York funds are quoted at par in 
 Montreal, the quotation for exchange will be practically the 
 same in both countries, as the transfer of funds between Canada 
 and New York, theoretically necessary to carry out the trans- 
 
210 Glossary of Financial Terms 
 
 action, can be made without gain or loss. If New York funds, 
 however, are at a discount or premium, the quotation is lower 
 or higher accordingly. 
 
 Non-Feasance. — Not doing; the non-performance of an act which 
 should be done. 
 
 Noting a Bill. — When a draft or other instrument has been dis- 
 honoured by non-acceptance or non-payment, a note to that 
 effect is endorsed on the bill, after which it may be formally 
 protested, and the endorsers and other obligants notified of 
 their continued liability. (Sections 118, 119 B.E.A.) 
 
 Not Negotiable. — (A danger signal but not a prohibition.) The 
 addition of these words to a draft, cheque, etc., limits the rights 
 of the holder, as it destroys the negotiable character of the 
 instrument, though in no way prohibiting its transfer. It may 
 pass from hand to hand just as freely as though the words were 
 absent, but, if there is any defect in the title, each holder takes 
 it, subject to the same defect. Such instruments are best 
 avoided in business. 
 
 o 
 
 o/a on account, 
 
 Oct October, 
 
 0/d overdraft, 
 
 0/D on demand, 
 
 O.K all correct (Orl Korrect), 
 
 O.N own notes, 
 
 % (Latin : Per centum) by the 
 
 hundred, 
 o/oo (Latin : Per mille) by the 
 
 thousand, 
 
 0/s, 0/sg outstanding, 
 
 O.S old style. 
 
 On Demand. — (See Demand.) 
 
 One Name Paper. — Single name paper. Paper without endorse- 
 ment. (See Double Name.) 
 
 Open Cheque. — A cheque not crossed is generally so called. . (See 
 Crossed Cheque.) 
 
Glossaky op Financial Terms 211 
 
 ^ Open Credit. — (1) A letter which contains an uncorditional request 
 to pay money to another person. 
 
 (2) A credit given by a bank which may be drawn against 
 without pledging security is also called an open or free credit. 
 
 Open Market Rate. — (See Market Rate.) 
 
 Open Policy. — A policy of marine insurance on which the value of 
 the interest assured is not stated until it becomes insurable. 
 
 A form of insurance policy covering for a specified period 
 all goods shipped or received. As a risk arises through re- 
 ceipt or shipment, it is endorsed on the policy. 
 
 Order. — A negotiable instrument drawn "to order" may be trans- 
 ferred by the payee to another person by endorsing and deliver- 
 ing it. (Section 60 B.E.A.) 
 
 Original Bill. — A bill which has been drawn and discounted without 
 endorsement. 
 
 Outlawed. — (See Limitations, Statute of.) 
 
 Overdraft. — Thus, if we deposit in a bank $2,000.00 and issue cheques 
 against the account for 12,500.00, our books will show a bank 
 overdraft (deficiency in the account) of $500.00. 
 
 Overdraw. — To overdraw is to draw out more than we put in and 
 have to our credit. 
 
 P 
 
 P page, 
 
 P/A power of attorney, 
 
 payt., pmt. or pay't. payment, 
 
 P.B pass book, purchase book, 
 
 p/c price current, 
 
 P.C (Latin per centum) by the hundred 
 
 pd paid, 
 
 per an by the year, 
 
 per pro per procuration, 
 
 pkg package, 
 
 P. & L profit and loss, 
 
 pm premium, 
 
 P.N postal note, 
 
212 Glossary of Financial Terms 
 
 P.O postal order, post office, 
 
 P.O.D pay on delivery, 
 
 P. 0.0 post office order, 
 
 pop population, 
 
 PP pages, 
 
 P.P. PP per procuration, 
 
 pro for, 
 
 pro proceeds, 
 
 prop'r proprietor, 
 
 pro tern (Latin pro tempore) for the time 
 
 being, 
 
 prox (Latin proximo) next, 
 
 P.S (Latin postscriptum) postcript, 
 
 pub publisher. 
 
 Paper. — Commercial instruments generally; such as, cheques, drafts, 
 notes, etc. A piece of paper is a single promissory note or bill 
 of exchange. 
 
 Paper Basis. — When paper currency is made legal tender without 
 provision for its redemption, the currency is said to be on a 
 paper basis. Its value depends entirely on the credit of the 
 Government issuing it and the amount issued. 
 
 Par. — A state of equality. Neither at a premium nor at a discount. 
 Mint Par: The value of the metal unit of one country expressed 
 in terms of that of another country having the same standard 
 of value. 
 
 Paramount Title. — In real property law, denotes a superior or better 
 title; in other words, the title which would prevail wdien dis- 
 pute as to its ownership arose. 
 
 Pari Passu. — At par; on an equal footing. 
 
 Parity. — When applied to the price of a stock or a commodity means 
 a price which is its equivalent when quoted in a different 
 market. For instance, the London price of a stock exceeds 
 the New York price of the same stock by about 2^ or 3 per 
 cent, after taking into consideration the exchange rate and the 
 London method of quoting American stocks (S5.00 to the 
 pound). With a cable rate of 4873^ the London parity of 
 New York stock at 68 would be 69.75. 
 
Glossary of Financial Terms 213 
 
 ^. ,. ., London parity X Rate o f Exch. 69.74 X487^ _^q 
 N.Y. parity = - ^ ■- 5 ^o. 
 
 , . New York parity X5 68X5 cq 'ja 
 
 London Parity = - ^^^^ ^^ Exchange '^TstT^^^-^^' 
 
 It will sometimes shorten the calculation to multiply or 
 divide by 2/10 instead of by 5. 
 
 In commodities the prices at two different centres are at 
 parity when the difference represents only the actual cost of 
 transportation, etc. 
 
 Par of Exchange. — The par of exchange or mint par as it is sometimes 
 called, is the fixed intrinsic value of the monetary unit of one 
 country expressed in terms of the currency of another country 
 using the same metal as its standard of value. Between a 
 gold standard country and a silver standard country there can 
 exist no par of exchange, for the reason that the value of the 
 silver in relation to gold is constantly fluctuating. 
 
 The par of exchange between two countries is based on 
 the amount of pure metal contained in the respective unit. For 
 instance, a sovereign contains 113.0016 grains of pure gold, and 
 a dollar contains 23.22 grains of pure gold. 
 One pound sterling equals —^^^^ = %4:MQ5Q 
 One dollar equals 23^X240^^9 3^3 p^^^^^ 
 
 When a sterling draft can be purchased for $4,863^ per 
 pound exchange is at par; if more is paid, exchange is above 
 par; and if less is paid, exchange is below par. 
 
 Particular Average.— The method of apportioning loss to a ship or 
 cargo which is not incurred for the benefit of all parties, or 
 which has arisen through an accident. Such loss remains 
 where it falls and is borne by the owner of the ship or cargo, 
 or by the underwriters, if insured. The method of "general 
 average" is employed when a sacrifice of property is made for 
 the general benefit of the ship or cargo, and all interested con- 
 tribute pro rata for the loss. For instance, when part of a 
 cargo is thrown overboard (or jettisoned) in order to lighten 
 the ship and thus save her, the loss is divided proportionately 
 between the ship owner and the freight owners, including the 
 one who owns the jettisoned freight. . 
 
 Parting.— The separation from gold bullion of any silver which it 
 may contain so that the two metals may be obtained in the 
 form of separate bars. 
 
214 Glossary of Financial Terms 
 
 Partnership. — Partnership is the relation which subsists between 
 persons carrying on a business in common with a view of 
 profit. 
 
 Party Wall. — A wall common to two adjoining buildings. 
 
 Par Value. — The nominal value. In commercial paper or shares of 
 stock, this will be the face value as written or printed thereon. 
 A company may issue shares of $100.00 each. This is the par 
 value, though the shares may have a market value above (at 
 a premium) or below (at a discount). 
 
 Payee. — The person to whom a negotiable instrument is made pay- 
 able. (Section 19 B.E.A.) 
 
 Payer. — The person by whom a negotiable instrument is paid. 
 
 Payment for Honour. — Payment of a dishonoured bill by a party 
 other than the drawee; the purpose is to save the honour of 
 the drawer or any other party liable thereon. (See In Case of 
 Need.) (Section 153 B.E.A.) 
 
 Payment Supra Protest. — Payment for honour after protest. 
 
 Per. — Through or by. It is a Latin term. We speak of a price per 
 yard, wages per hour or per day, etc. 
 
 Per Annum. — By the year. 
 
 Per Cent. — By the hundred. 
 
 Percentage. — A part expressed in terms of one hundred. Thus 34 
 per cent. {%) is 34/100, thirty-four parts out of 100, which 
 represents the whole. 
 
 Per Diem. — By the day. 
 
 Per Mille. — Per thousand. Often written Vro. 
 
 Per Procuration. — By power of attorney, abbreviated in signing to 
 "per pro" or "p.p." (Sections 4, 51, 52, B.E.A.) (See Pro 
 Procuration.) 
 
 Personal Property. — Property that can be moved about as distin- 
 guished from Real Property. The right or interest which a per- 
 son has in things personal. Things personal are things movable, 
 which may accompany the owner's person wherever he may go. 
 They are of two kinds, Corporeal and Incorporeal. Corporeal 
 for such property is Choses in possession or chattels. Incor- 
 
Glossary op Financial Terms 215 
 
 poreal personal property includes all rights, which by being 
 realized and enforced, give us the control of material things. 
 To this class belong choses in action, including book debts and 
 debts due on written securities, such as notes, cheques and 
 drafts, also rights of action for recovering damages for wrongs, 
 etc. 
 
 *'Pigs on Pork."— Bills drawn by a branch house on the parent office 
 
 or vice versa: one name paper of the most dangerous kind. 
 Porterage.— (1) The charge made for the delivery of telegrams 
 outside the free delivery radius. 
 
 (2) The charge made by banks for presenting drafts, etc., 
 
 outside of their ordinary collection radius. 
 Post Dated.— A cheque or other negotiable instrument is said to be 
 
 post dated when it bears a later date than the true date of issue. 
 
 (Section 27 (d) B.E.A.) 
 Posted Rates.— The counter rate or rates quoted for small transactions 
 
 in exchange. These are higher than the actual rates charged 
 
 for large amounts. 
 Poste Restante.— A French phrase written upon letters signifying 
 
 that it is to be held till called for at the general delivery of 
 
 the posto ffice. 
 Power of Attorney.— A written instrument authorizing an agent to 
 
 act for his principal in the matters specified in the instrument, 
 
 which is signed by the principal. If the agent is to act in signing 
 
 documents under seal, the power of attorney must itself be under 
 
 seal. 
 Preference Shares.— A share in the capital of a joint stock company 
 
 on which a stated dividend must be paid before the profits are 
 
 available for dividends on the common shares. Preference 
 
 shares sometimes carry other privileges. 
 Premises.— Things previously mentioned; houses, lands, etc. 
 
 Premium.— (1) The amount paid for securities or gold over and above 
 their par or face value. 
 
 (2) Exchange is at a premium when it sells at more than 
 the mint par and at a discount when it sells for less. 
 
 (3) The amount paid for a policy of insurance. 
 
 Prescription. — (See Limitation, Statute of.) 
 
216 Glossary of Financl\l Terms 
 
 Presentation or Presentment. — The act of presenting a bill of ex- 
 change for acceptance or a note or accepted draft for payment. 
 (Sections 75 to 94 B.E.A.) 
 
 Present Value. — The value at the present moment of a note or sum 
 of money which is not payable until a future date. To ascer- 
 tain this value, discount must be deducted from the maturity 
 value for the time that has to elapse before the sum becomes 
 payable. 
 
 Pressure on the Money Market. — Signifies that, owing to high 
 rates for money, unfavorable rates of exchange or other causes, 
 there is a difficulty in obtaining money. 
 
 Presumption. — An inference of the law deduced from certain facts 
 of the truth of some other fact or proposition. 
 
 Primarily Liable. — The party on whom the liability for the payment 
 of a negotiable instrument first rests. The maker of a note 
 or the acceptor of a draft is said to be primarily liable, while 
 the endorser or drawer of a bill is secondarily liable (q.v.). 
 
 Prime Bills. — Foreign bills of exchange issued by and drawn on houses 
 or banks of unquestionable standing. 
 
 Prime Cost. — The original or first cost of an article. This includes 
 the cost of material and direct labour, but not factory expenses 
 which are part of the cost of production. 
 
 Private Company. — A joint stock company, the number of sharehold- 
 ers in which (e.g., in Ontario) is limited to fifty exclusive of those 
 in the employ of the company, the transfer of shares of which 
 is restricted by charter and which cannot offer shares or bonds 
 to the public. 
 
 Private Rate of Discount. — (See Market Rate.) 
 
 Probate of Will. — The proof of the will of a deceased person before a 
 court or judge and the decision thereon of such court. 
 
 Proceeds. — The actual net amount received after a bill of exchange, 
 etc., has been sold or a note discounted. 
 
 Pro_Forma. — As a matter of form. A pro forma document is one 
 1^ drawn up as an approved model to be used as a guide. 
 
Glossary op Financial Terms 217 
 
 Promissory Note. — A promissory note is an unconditional promise 
 in writing made by one person to another, signed by the maker, 
 engaging to pay on demand or at a fixed or determinable future 
 time, a sum certain in money, to, or to the order of, a specified 
 person, or to bearer. (Bills of Exchange Act, Sec. 176.) 
 
 Proof in Bankruptcy. — Evidence of the existence of a debt or liability 
 which every creditor must give in bankruptcy or in the winding 
 up of a joint stock company. 
 
 Pro Procuration. — A term used to show that the writer has power 
 to transact business for his principal. Generally the power is 
 limited to the doing of certain acts. (Section 51 B.E.A.) (See 
 Per Procuration.) 
 
 Pro Rata. — At a certain rate. Proportionately. 
 
 Prospectus. — The document put forward by persons interested in a 
 company or other corporation to induce the public to purchase 
 shares, bonds or other securities offered by the corporation. 
 
 Protest. — The official procedure taken by a notary public or justice 
 of the peace at the instance of the holder of a dishonoured paper 
 in order to preserve the rights of such holder against the drawer 
 and endorsers. Also applied to the document which is drawn 
 up by the notary public or justice of the peace setting forth 
 the fact of dishonour, protesting against the same, and giving 
 due warning that drawer and endorsers will be held liable for 
 such dishonour. (Sections 109 to 126 B.E.A.) 
 
 Proxy. ^(1) A document authorizing one person to vote or act for 
 another. 
 
 (2) The person so voting. 
 
 Public Company. — A joint stock company in which the transfer of 
 shares is not restricted, the number of shareholders is not limit- 
 ed except by the number issued and which, by conforming to 
 the regulations imposed, may offer its shares or securities to the 
 public. 
 
 Puts and Calls — A "Put" is a contract, which secures to the holder 
 the privilege of delivering to the person named therein a number 
 of shares of stock at a specified price within a time limited, but 
 without being obliged to deliver it. The holder of a "Put" is 
 not required to pay interest. A "Call," on the other hand, is 
 a contract securing to the holder the privilege of buying a 
 
218 Glossary of Financial Terms 
 
 number of shares of stock at a specified price within a limited 
 time, but without the obligation to purchase it. The holder 
 of such must pay interest on the purchase price of the stocks to 
 the day of delivery. While these pri\ ileges may not be recog- 
 nized by the stock exchanges, they frequently come up in 
 connection with matters of general knowledge, and should he 
 understood. It will be seen that in each of these there is an op- 
 tion, a "Put" being where the money is given for the option of 
 selling stock, and a "Call" where the party reserves to himself 
 the right of buying, price and date being in both cases agreed 
 upon, and the option money paid at the time of the agree- 
 ment. 
 
 Q 
 
 qr quarter, 
 
 qu . . . . query, 
 
 q.v (Latin quod vide) which see. 
 
 Oualified Acceptance. — An acceptance which in express terms varies 
 the effect of the bill as drawn. The holder of a bill may refuse 
 to take such an acceptance, and should in any case give immedi- 
 ate notice to prior holders or endorsers and to the drawer; 
 failing such notice, the latter are all discharged from any liability 
 on the bill. If a drawer or endorser on receipt of such notice 
 dissents, he is not liable. (Sections 38, 83, 84, B.E.A.) 
 
 Oualified Endorsement. — An endorsement without recourse (q.v.). 
 
 Quarter Days. — The last day of each of the quarters of the year on 
 which payments of rent, interest, etc., fall due in England. At 
 these times large sums of money are withdrawn from the banks, 
 but are subsequently returned. The quarter days are (1) Lady 
 Day, March 25th; (2) Midsummer Day, June 24th; (3) Michael- 
 mas Day, September 29th; (4) Christmas Day, December 25th. 
 
 Quasi. — As if; though analagous to. Quasi corporations, for instance, 
 are bodies like corporations, and yet are not strictly corporations 
 in the legal sense. 
 
 Quid Pro Quo. — One thing for another. A mutual concession in 
 business between parties. 
 
 Quit Claim Deed. — Form of deed in the nature of a release. 
 
 Quotation. — Published market price of exchange, securities or com- 
 modities. 
 
Glossary of Financial Terms 219 
 
 R 
 
 R - rupee, Rs. rupees, Rx. 10 rupees, 
 
 R/A refer to acceptor, 
 
 R.A.P rupees, annas, pice, 
 
 R/D refer to drawer, 
 
 recpt receipt, 
 
 reg., reg'd registered, 
 
 rev. a/c revenue account. 
 
 Rate of Exchange. — The amount which will be given in the currency 
 of one country for a fixed sum or unit in the currency of another 
 country; the rate or price varies from day to day. In domestic 
 or inland exchange the variations are effected by means of a 
 discount or premium on the amount sold. (See Course of Ex- 
 change.) 
 
 Ratio. — A term used to express the relation between the value of 
 gold and the value of silver. The United States standard ratio 
 of 15.988:1 means that one ounce of gold is counted as worth 
 nearly sixteen ounces of silver. The standard or legal ratio 
 must not be confused with the actual or market ratio of gold 
 and silver, which is found by dividing the current market 
 price of pure silver into $20,672 (the value of an ounce of pure 
 gold) ; for example, when silver is worth 59 cents per ounce the 
 ratio is 35.1 (20.672-.59). 
 
 Real Money. — Actual gold in which values are measured. Repre- 
 sentative money such as bank notes, etc., is the promise to 
 pay real money on demand and is used to augment the supply 
 of currency and on account of its greater convenierice. 
 
 Real Property. — That which is fixed or immovable and includes also 
 all buildings erected or things growing on it together with that 
 which is beneath or above the surface. 
 
 The right or interest one may have in things real, which 
 include land and whatever is permanently affixed to land, either 
 by nature or the hand of man. 
 
 Rebate Rate. — The rate per cent, at which documentary bills of ex- 
 change will be rebated, that is, the rate at which discounts 
 will be allowed on the time which the bill has still to run, if 
 the bill is paid by the acceptor before maturity in order to 
 
220 Glossary of Financial Terms 
 
 obtain the bill of lading. In London, bills are usually rebated 
 at a half per cent, above the short deposit rate (q.v.) which in 
 its turn is generally 1H% below the Bank of England rate. 
 
 Receiver. — A person appointed to administer the estate of a corpora- 
 tion in the process of dissolution and to distribute the proceeds 
 among those entitled thereto. 
 
 Recourse. — The right of a holder of a bill of exchange to demand 
 payment of the bill from some other person than the acceptor. 
 (Section 135 B.E.A.) 
 
 Re-Discount. — The resale of a bill of exchange or promissory note. 
 The bill wallet of an English bank forms one of its most readily 
 available reserves, as it can re-discount or sell its bills in the 
 market at any time in order to meet its cash requirements. 
 
 Re-Exchange. — When a bill of exchange is dishonoured by the drawee 
 and paid for the honour of the drawer by some other person, 
 the person paying it draws upon the latter for the amount 
 together with the protest fees, exchange and other expenses. 
 The operation is called re-exchange. (Section 136, B.E.A.) 
 
 Registered Bonds. — Bonds which are registered, in the name of the 
 holder, in the books of the issuer, this being as a protection 
 against loss or theft. 
 
 Registration. — In all transactions affecting lands, such as sales and 
 mortgages, the deeds and other instruments should be promptly 
 registered in the local Registry Office. Unregistered instru- 
 ments are good and effectual between the principals themselves, 
 but not as against an innocent third party, who has in the mean- 
 time registered his title, even though the latter transaction may 
 be fraudulent on the part of the vendor or mortgagor. 
 
 Reichsbank. — The Imperial Bank of Germany. 
 
 Reichsmark. — Commonly called a mark, the German monetary unit, 
 worth 23.8 cents. 
 
 Re-Insure. — To insure a second time. When an insurance company 
 accepts a large risk it is usual to re-insure part of it with other 
 companies. This does not affect the original liability to the per- 
 son insured. 
 
 Release. — An instrument in the general form of a deed which in dis- 
 tinct terms remits a claim. 
 
Glossary op Financial Terms 121 
 
 Remedy. — (See Mint Remedy.) 
 
 y Remittance. — Money or its equivalent, forwarded from one place to 
 another. Bank remittances to correspondents for credit or 
 collection usually consist of cheques and drafts. 
 
 Renewal. — To renew a note is to give another in place thereof when 
 due instead of making payments, the process being called 
 renewal. 
 
 Rentes. — French or other European government bonds. They cor- 
 respond to British Consols. 
 
 Rent. — The amount paid for the use of land or premises owned by 
 another. 
 
 Repleven. — An action to cover the possession of goods wrongfully 
 taken and retained. 
 
 Rescission. — The annulling or dissolution of contracts by mutual 
 consent or by one party. 
 
 Reserve. — That portion of a bank's quick assets (cash reserve) held un- 
 invested in the form of specie and legal tenders. The second 
 line of reserve consists of balances carried in foreign banks, 
 cheques on other banks and call loans, while stocks and bonds 
 held as investments may be called the third line. The word 
 "Reserve" is frequently used as synonymous with "Rest" 
 (q.v.) but this is very confusing and the use of the word in 
 this sense should be abandoned. 
 
 In a business concern this term, when used without quali- 
 fication, indicates undivided profits retained in the business as 
 working capital or invested pending requirements. In this 
 sense it is frequently used as synonymous with "Reserve 
 Fund." When thus used, it indicates a general reserve which 
 may be distributed when desired, but more usually retained 
 against contingencies. It is generally used, however, to indi- 
 cate a special reserve; such as, provision for depreciation or 
 bad debts, the title being qualified to indicate the purpose; 
 e.g., "Reserve for depreciation," or "Reserve for bad debts." 
 In the former case the account appears among the liabilities 
 in a balance sheet and in the latter the amount is usually de- 
 ducted from the book value of the asset to which it specifically 
 refers. 
 
222 Glossary of Financial Terms 
 
 Reserve Fund. — While the word "fund" would indicate an in- 
 vestment, the term "Reserve Fund" is more often used, as 
 already explained, to indicate liability to shareholders for 
 profits held back from distribution and retained in the 
 business, but without being kept in an ear-marked fund. (See 
 Reserve.) 
 
 Resources. — (See Assets.) 
 
 Residuary Devisee. — A person named in a will who is entitled to all 
 the real property remaining after the other devisees have been 
 paid. 
 
 Residuary Legatee. — Person named in a will wdio is entitled to the 
 personal property after the payment of the other legacies speci- 
 fically mentioned in the will. 
 
 Respondentia. — A loan made on the security of a ship's cargo. As 
 in the case of a bottomry-bond (q.v.) the repayment of the 
 loan is dependent on the safe arrival of the ship at its destina- 
 tion. As this condition involves additional and unusual risk, 
 such contracts are excepted from the ordinary laws of usuary. 
 
 Restrictive Endorsement. — An endorsement placed on a bill or 
 promissory note which restricts its further negotiability; for 
 instance, "Pay to Brown only." (Section 68 B.E.A.) 
 
 Retainer.-^A contract under which a counsel or solicitor is engaged 
 not to serve the opposing party in a particular law^suit. 
 
 Retire a Bill. — To take up a bill or note. 
 
 Returns. — (1) Periodical statements and reports of an official nature. 
 (2) Cheques returned through the clearing house unpaid. 
 
 Reversion. — A right to property which will fall into possession after 
 \he expiration of a certain period, or on the happening of a 
 certain event. 
 
 Revocation. — The recall of power or authority conferred; e.g., the 
 revocation of a Power of Attorney. 
 
 Rights. — This indicates privileges, and generally refers to privileges 
 due holders of shares of capital stock, etc., in the event of a 
 new issue. For instance, we will assume that a new issue is 
 made of shares of C.P.R. stock at $175 per share, the market 
 price on the exchange at the time being $263 per share, and 
 that the terms of the issue give present shareholders the right 
 
Glossary op Financial Terms 223 
 
 to purchase one share for every four shares they now hold. 
 This privilege is called a Right. It will be seen that this Right 
 represents $22 on each share held, and should a shareholder not 
 desire to make the purchase, but is willing to sell the shares he 
 has, he would demand not only the market price of the shares 
 themselves, but the price or value of his Rights in addition. 
 Assuming that he was willing to accept $20 per share for his 
 Rights, he would ask $283 for each share he sold, including 
 Rights. The value of the Rights is considered as separate 
 from the value of the stock itself. He may sell his Rights 
 without his stock, and if the purchaser can buy them slightly 
 below their actual value, he will have little difficulty in dis- 
 posing of his Rights, and thus receiving the benefit due him 
 without having to increase his investment. These Rights are 
 sometimes described as premiums on issue of new stock, and 
 the possibility will be seen of receiving cash for these premiums 
 or Rights without shareholders actually taking up the stock 
 of the new issue themselves. 
 
 Rising Exchange.— (See Falling Exchange.) 
 
 S 
 
 S silver, 
 
 S.B special bargain, sub-branch, 
 
 short bill, sales book, 
 
 S.C safe custody, 
 
 sec secretary, 
 
 Sept. or Sep September, 
 
 ship't shipment, 
 
 shs sharefe, 
 
 SPA. . sundry persons' account, 
 
 S.S special settlement, steamship, 
 
 St. dft sight draft, 
 
 ster., stg sterling, 
 
 St., stet (Latin stet) let it stand, 
 
 stk stock, 
 
 S.V surrender value, 
 
 supt superintendent. 
 
 Saisie-arret. — (See Garnishee Order.) 
 
224 Glossary of Financial Terms 
 
 Sans Frais. — Incur no expense. An instruclion sometimes found on 
 a foreign bill. 
 
 Sans Recours. — Without recourse fq.v.). 
 
 Scandinavian Union. — This monetary union consists of Norway, 
 Sweden and Denmark. The common unit is krone or crown 
 of 100 ores of a mint par \alue of 26.8 cents. 
 
 Schedule. — A term much used in business to indicate a list of prices 
 or of goods in in\entory. 
 
 Scrip. — A provisional certificate of shares in a company, government 
 loan, etc. 
 
 Second and Third Class Paper. — Bills endorsed or guaranteed by 
 merchants or others whose commercial standing is not of the 
 highest. 
 
 Secondarily Liable. — The person on whom rests the absolute require- 
 ment to pay a negotiable instrument is said to be primarily 
 liable. All other obligants are liable only in case of his failure 
 to do so, and are therefore said to be secondarily liable. 
 
 Seigniorage. — The difference between the cost of bullion and the 
 value of the coin into which it is converted. In most countries 
 there is no seigniorage or profit on coining gold, as the process 
 adds no value to the metal. In the case of silver coins, how- 
 ever, there is considerable difference, and this seigniorage ac- 
 crues to the Government. 
 
 Selling Rate. — The rate at which exchange is sold by a dealer; it is 
 naturally higher than the rate at which he is willing to buy. 
 
 Set of Exchange. — A foreign bill of exchange drawn in duplicate 
 or triplicate. The copies are numbered first or second of ex- 
 change, etc., and payment of any one copy extinguishes the set. 
 
 Set Off. — The claim which one party has against another who has a 
 claim against him, also called a counter claim. 
 
 Settlement Day. — The fourth or last day of what is called "Settle- 
 ment" on the London Stock Exchange, when all securities are 
 delivered and all differences are paid or received. "Settle- 
 ments" take place in London e\ery fortnight. 
 
 Shipping Documents. — Invoice of goods shipped, the policy insur- 
 ing them while in transit and the complete set of the bills of 
 lading. 
 
Glossary op Financial Terms 225 
 
 Ship's Papers. — Ship's papers are the documents which the captain 
 holds to prove the identity of the ship, the cargo it carries, 
 its destination, etc. 
 
 Short Bills. — A bill of exchange running thirty days or less. 
 
 Short Exchange. — Cheque rate. The rate of exchange at which a 
 foreign bill, which is payable at eight days or less, is quoted. 
 
 Short of Stock. — Speculators are said to be "short of stock" when 
 they have sold what they do not possess. Such are known as 
 "bears." 
 
 Shut for Dividend. — An expression implying that the transfer books 
 of joint stock corporations are closed to permit of the prepara- 
 tion and issue of dividend warrants. 
 
 Sight Bills. — Sterling bills drawn "at sight" are payable on demand, 
 but those drawn so many days "after sight" require acceptance. 
 
 Silver Bullion. — Silver is quoted in London at so many pence per 
 ounce of silver .925 fine (British Government standard). In 
 the United States the price is given as cents per ounce for pure 
 silver (1000 fine). 
 
 Silver Standard. — This standard exists in countries where it is en- 
 acted by law that silver shall be the measure of value. China 
 and its dependencies and some countries in South America 
 are exponents of this standard. The domestic trade of these 
 countries is regulated by the bullion price of silver, but all 
 outside transactions are based on gold and in the end the 
 value of silver- is thus regulated by these international trans- 
 actions. 
 
 Single Name Paper. — Paper bearing only the name of the maker, 
 also called Straight Paper or One Name Paper. 
 
 Single Standard. — Exists where either gold or silver (but not both) 
 is by law the basis of value. (See Monometallism.) 
 
 Sinking Fund. — A fund for the purpose of redeeming an issue of 
 bonds or indebtedness. It is formed by the investment of 
 periodical payments of such an amount that the sum of the 
 payments together with the accrued interest, will equal the 
 amount of the debt at maturity. 
 
226 Glossary of Financial Terms 
 
 Sinking Fund Bonds. — Are bonds which arc not payable on the 
 annuity or instalment system, but payable at a definite future 
 date and against which the sinking fund is accumulated to 
 meet the amounts when due. The student of public finance 
 will find a number of other terms applied in connection with 
 bond issue. Most of these are self-explanatory, but all should 
 be carefulh- understood before entering into transactions in 
 which they are involved. 
 
 Sixties. — A colloquialism for sixty days sight bills. 
 
 Sola. — A bill of exchange of which only one copy is issued as distinct 
 from a bill which is drawn in a set. (See Via.) 
 
 Sold Note.— (See Bought and Sold Note.) 
 
 Special Endorsement. — An endorsement upon a negotiable instru- 
 ment stating the name of the person to whom it is transferred. 
 It can then be negotiated only by his endorsement. (Section 
 67 B.E.A.) 
 
 Specie. — (1) In kind. (2) In coin. The name is generally applied 
 to gold and silver coin in bulk. 
 
 Specie Payment. — Payment in coin or bullion. 
 
 Specie Points. — Specie points, or gold points as they are sometimes 
 called, are the rates of exchange produced by buying gold in 
 one country and selling it in another. The mint or theoretical 
 par remains invariable in gold standard countries, and if the 
 exporting and importing of gold could be effected without ex- 
 pense or loss of interest, the mint par in gold points between 
 any two countries would be practically identical, but a ship- 
 ment of gold involves heavy expenses for interest, freight, etc. 
 These, when deducted from the mint par, give the Import 
 Gold Point and when added to the mint par give the 
 Export Gold Point. That is to say, when it costs more 
 to buy sterling exchange in New York than it would to buy 
 gold and ship it to London, the remitter naturally takes the 
 cheaper method and Exports gold, but when on the other 
 hand exchange is so freely offered in New York that the rate 
 becomes abnormally low, a seller may find it cheaper to transfer 
 his London balance by Importing Gold. 
 
 S.S. — Abbreviation of the Latin word scilicet meaning "to wit" 
 (that is). 
 
Glossary op Financial Terms 227 
 
 Stale Cheque. — A cheque that has not been presented for payment 
 within a reasonable period. A person who takes such a cheque 
 does so at his own risk. What constitutes a reasonable time 
 is hard to define, and depends on circumstances. A cheque 
 over a week old should be looked at askance. (Section 70 
 B.E.A.) 
 
 Standard. — As applied to money and exchange, means the measure 
 or basis of value as established by the law of a country. Where 
 gold alone or silver alone is the basis of value, the country has 
 a single standard. Where both gold and silver are used in fixed 
 proportion or ratio to each other, the country has a double or 
 bimetallic standard. Where paper money alone is used, a 
 country has no standard. 
 
 Standard Gold. — All transactions in gold with the Imperial Mint or 
 the Bank of England are made on a basis of British standard 
 gold, which is 11 parts pure gold and 1 part alloy or 916% fine 
 out of 1000. (See Mint Gold, Eagle.) 
 
 Standing Order. — It is an English custom to request a bank to 
 make periodical payments for a customer such as for fire and 
 life premiums, and other annual payments. These are called 
 "standing orders." 
 
 Statute of Limitations. — (See Limitations, Statute of.) 
 
 Sterling Loan. — The loan of sterling bills of exchange. The borrower 
 of the bill gives a note with security and either remits the bill 
 direct to London to discharge liability abroad, or else sells the 
 bill in New York and obtains credit for the proceeds. When 
 the bill matures he can either pay the dollar equivalent in cash 
 at the current rate of the day, or else deliver a demand bill of 
 exchange for the amount. Sterling loans are used when it is 
 difficult to obtain money in New York in the usual way. 
 
 Stock. — Frequently used as though synonymous with shares, but there 
 is a difference, as some company acts provide for the con- 
 version of shares into stock. Shares have a specified par value 
 each, but if the share capital is converted into stock, the holder 
 of the stock may dispose of it in any odd amounts he may 
 choose, which the holder of shares cannot do. (See also De- 
 benture Stock.) 
 
 A corporation may have a capital stock not divided into 
 shares of a specified par value. 
 
228 Glossary op Financial Terms 
 
 Stockholder. — One who owns shares in a joint stock company or 
 corporation, the capital of which is not divided into shares. 
 
 Stop Order. — An order in writing by a customer to his bank, request- 
 ing it to refuse payment of a cheque or bill of exchange when 
 presented. 
 
 An expression signifying that a broker has orders to sell 
 on the best terms he can if the firice should go against the 
 client and reach a named figure. For example, if C.P.R. 
 shares are quoted at 180 and a "bull" holding shares sees the 
 market weakening, he might give his broker a "stop order" at 
 175, which would mean that should the price fall to 175, the 
 broker is to sell the shares at best price obtainable. 
 
 Stoppage in Transitu. — The right of an unpaid vendor to stop 
 goods in transit before they pass into the control of a purchaser 
 who has become insolvent. The conditions necessary to this 
 right being exercised are (1) the consignee must be insolvent. 
 
 (2) the goods must not have been delivered to him or his order, 
 
 (3) the goods must be unpaid for, (4) they must be in transit. 
 
 Storage. — Charges made for use of a warehouse for storage purposes. 
 
 Subpoena. — A writ commanding the attendance of a person in court. 
 
 Subrogation. — Substitution of one person or thing in the place of 
 another, particularly the substitution of one person in the 
 place of another, as a creditor, with succession to all the rights 
 of the latter. 
 
 Summons. — A writ directed to a sheriff or other officer requiring him 
 to inform the person named that action has been commenced 
 against him in the court from which the writ is issued, and that 
 he is required to appear upon the day mentioned therein and 
 answer the complaint in such action. 
 
 Surety. — One who has agreed with another to make himself responsi- 
 ble for the debt, default of misconduct of a third party. Similar 
 to guarantee. 
 
 Surplus Money. — (See Floating Money.) 
 
Glossary of Financial Terms 229 
 
 T 
 
 / 
 
 T.Q tel quel rate, 
 
 treas treasurer, 
 
 trf transfer, 
 
 T/T telegraphic transfer. 
 
 Talon. — A certificate attached to a bond entitling the holder of the 
 bond to a new sheet of coupons, when the coupons previously 
 issued have been paid. Used chiefly on the Continent. 
 
 Telegraphic Transfer. — (See Cable Transfers.) 
 
 Tel Quel Rate. — In exchange it means a rate calculated to corres- 
 pond with the term of a bill and endorsed thereon, meaning that 
 it applies to the bill "such as it is" and that the price is net, 
 and includes all interest, commissions and other charges. A 
 bill of exchange for £100 drawn in sterling in London on a 
 Canadian customer with a tel quel rate of 4.86}^ endorsed 
 thereon, would mean that the acceptor would pay only $486.50 
 at maturity, no matter what the current rate of the day might 
 be. 
 
 Tenants in Common. — Persons holding lands and tenements by 
 several and distinct titles and not by a Joint Title. 
 
 Tender. — The offer of a sum of money in satisfaction of a debt or 
 claim by producing and offering the exact amount to the 
 creditor, and declaring a willingness to pay. 
 
 Term of a Bill. — The time for which a bill is drawn; as, "sixty days 
 after sight." 
 
 Terms. — Conditions as to the time and kind of payment of a sale 
 of goods or other property. 
 
 Time Draft. — A draft payable at a future date and not on demand. 
 (Section 24 B.E.A.) 
 
 To Bearer. — An expression on a cheque signifying that it may be paid 
 without identifying the payee. 
 
 Token Money. — That part of the money of a country which circulates 
 not by reason of the intrinsic value of the metal it contains, 
 but by reason of the legalized relation which it bears to the 
 
230 Glossary of Financial Terms 
 
 standard monetary unit of the country. All standard gold 
 coins are intrinsically worth the amounts named upon them, 
 but the silver and copper coins are not, the bullion value of a 
 silver coin being generally about half of its face value. The 
 difference is called seigniorage (q.v.) and accrues to the govern- 
 ment as a profit. 
 
 Tolerance. — (See Mint Remedy.) 
 
 Torrens System. — A system of land transfer introduced into Canada 
 from Australia, and adopted exclusively in the Western 
 Provinces and to a certain extent in Ontario. It is vastly 
 superior to the old system of land transfer by means of deeds, 
 obtaining in other parts of Canada. The Torrens system 
 registers an indefeasible title to the land, not a deed which is 
 only an evidence of ownership, which may be clouded or 
 vitiated by latent defects and flaws. 
 
 Under the Torrens system no search is necessar\-. In 
 case of purchasing land with a Torrens title, the purchaser 
 has only to assure himself that the vendor is the actual owner, 
 in other words, the only point enquired into are those affecting 
 the single transfer in question. Once sold, the buyer is abso- 
 lutely assured of his title to the land. 
 
 The registration is simple, no description of the land is 
 necessary, all land being systematically numbered in the 
 Registry Office. It is only necessary, therefore, to mention 
 the number under which the property is registered. 
 
 Tort. — A prixate wrong or injury other than that arising from the 
 breach of a contract for which damages can be collected. 
 
 Trade Dollar. — A dollar coined by the United States to compete 
 with the Mexican dollar in trade with China and the F'ar 
 East. It had no legal status within the United States, and 
 has been withdrawn from circulation; any still outstanding 
 have only a bullion value of about fifty cents or less. 
 
 Trade Discount. — Discounts from a list price. By means of trade 
 discounts wholesalers are able to \ary the price to dealers 
 without changing the list prices, merely \arying the rates of 
 discount which are made singly or in series. 
 
 Trade Mark. — Is a distinctive mark adopted by a person or firm to 
 distinguish their goods from those of others. This trade mark 
 is registered, which prevents others from adopting the same, 
 
Glossary op Financial. Terms 281 
 
 and thus protects special lines from encroachment. When dis- 
 posed of with the other assets of the business, it may have a 
 value in much the same way as have patent rights or goodwill. 
 
 > 
 
 Transferee. — The person to whom a negotiable instrument or any 
 other document is transferred; the person who transfers it is 
 called the Transferer. 
 
 Travellers' Cheques. — Travellers' cheques afford a convenient 
 method of carrying funds when travelling, as they may be 
 cashed practically anywhere, and are easily negotiated, as 
 they provide a simple means of enabling the owner to identify 
 himself. They are issued in denominations of even amounts, 
 $10, $20, $50 and $100, with the equivalent amounts, which 
 will be paid in the principal foreign countries stated on the 
 face of each cheque. 
 
 Treasury Bills. — Instruments of credit issued by governments and 
 municipal corporations for sums of money borrowed for a 
 short period. These are frequently resorted to during a period 
 of high interest rates to postpone an issue of bonds for one or 
 two years, when it is hoped money rates may be more favour- 
 able for long term bonds. 
 
 Triangular Operations in Gold. — This is an indirect method of 
 shipping gold with the idea of sending it to some point where it 
 can be used to buy cheaply exchange on some other point. 
 One of the best known of the so-called triangular operations is 
 that in which gold is shipped to Paris for the purpose of buying 
 exchange on London. The succession of steps is as follows: — 
 The gold is shipped to Paris and exchange on London is pur- 
 chased there with the proceeds. This exchange is then re- 
 mitted to London for credit of the American bank that shipped 
 the gold. The latter then draws its sterling draft on London 
 against the balance so created. 
 
 Troy Weight. — Troy weight is used in Great Britain, Canada and 
 the United States in all transactions pertaining to gold and 
 silver coin and bullion: — 
 
 24 grains =1 pennyweight (dwt.), 
 
 20 dwts. =1 ounce (oz.), 
 
 12 oz. =1 pound (lb.) troy. 
 
232 Glossary of Financial Terms 
 
 True Exchange. This is exchange in its most simple form, and re- 
 quires at least three persons to operate a transaction. For 
 instance, Brown in Montreal owes Smith in London £1,000; 
 Jones in Bristol owes Brown £1,000; Brown sends Smith a 
 document ordering Jones to pay £1,000 to Smith, and thus all 
 indebtedness is discharged without loss. 
 
 Trust. — A term applied to large combinations of business concerns 
 where several have been amalgamated into one large company. 
 
 Trust Deed. — A deed or disposition which conveys property not for 
 the benefit or ownership of the party to whom conveyed, but 
 for such purposes as are pointed out in the deed, e.g., a debtor 
 conveying property to a trustee for payment of his debts. 
 
 Trustee. — The person to whom property is conveyed or bequeathed 
 in trust for others, that it may be applied to the purposes 
 directed by the person making the conveyance or bequest. 
 This implies confidence that is reposed in the trustee. 
 
 Turnover. — In banking, the total of the debits or total of the credits 
 of an account in a given period. In trade, the total sales with- 
 in a given period, also the cost of the goods sold within a given 
 period. 
 
 u 
 
 ult ultimo. 
 
 Ultimo. — Last month. 
 
 Ultra Vires. — Means beyond or outside the powers. If a company 
 is organized to manufacture a certain line of goods, it would 
 be ultra vires of that Company to undertake contracts which 
 are not permitted in its charter. In the same way it is 
 ultra vires of a Province to pass legislation that affects the 
 Dominion as a w^ole. Such acts would be disallowed. 
 
 Under Rebate. — (See Rebate.) 
 
 Underwriter. — One who subscribes to a contract of indemnity, either 
 of insurance against specified risks or against failure to obtain 
 subscribers for a specified number of shares or for a specified 
 amount of a bond issue or loan. 
 
Glossary of Financial Terms 233 
 
 Upset Price. — The lowest price at which (in auction sales) a vendor 
 is willing that his property shall be started and sold if no higher 
 bids can be obtained. 
 
 Usance. — The term allowed by usage or trade custom for the cur- 
 rency of bills of exchange between any two countries, a relic 
 of the days of sailing ships. The practice of a fixed usance is 
 gradually being abandoned. : 
 
 The length of the usance in different places varies from 14 
 days to six months after the date of the bill; the following are 
 the principal usances with London: — 
 
 New York 60 days, 
 
 China, India and Japan 4 months, 
 
 Brazil 3 months. 
 
 Usufruct.— The right of using for a given time something belonging 
 to another person, but without diminishing or altering its sub- 
 stance. This right is similar to that possessed by a life-tenant. 
 
 V 
 
 si 
 
 v., vs versus, against, 
 
 viz namely, 
 
 vol volume. 
 
 Value Bill.— A draft drawn against a consignment of property such 
 as a documentary bill or a bill drawn with securities attached. 
 
 Value on Account. — An expression sometimes used in drawing bills 
 of exchange when they are for services rendered or when there 
 is a balance remaining in favour of the drawer. 
 
 Valued Policy. — Policy of re-insurance on which the value of the 
 insurance is stated. (See Open Policy.) 
 
 Value Received. — A term used in a negotiable instrument to indi- 
 cate that it has been made for a consideration and not for 
 accommodation, the acknowledgment of a bona fide trans- 
 action. 
 
 Vendee. — The party for whom a purchase is made, whether he himself 
 or an agent acts as the purchaser. 
 
 Vendor. — A person on whose behalf a sale is made, whether he him- 
 self or an agent is the seller. 
 
234 Glossary of Financial Terms 
 
 Vendor's Shares. — Shares which are taken by persons, who convert 
 their business into joint stock companies, in payment for their 
 property instead of cash. 
 
 Via. — (1) By the way of. 
 
 (2) When a bill of exchange is drawn in duplicate or triplicate 
 each bill is called a "via," but if only one i)ill is drawn, it is 
 called a "sola" (q.v.).- 
 
 Vise. — An official endorsement on a pass-port or other document certi- 
 fying that it is correct. 
 
 Voucher. — Any document or waiting that is proof of the payment or 
 receipt of money or of other transaction involving money or 
 money's worth. 
 
 w 
 
 wt weight. 
 
 Waiver. — The renunciation of a right. A document gi\-en to a bank 
 by a customer which waives his right to demand notice and 
 protest on any bills, etc., held by the bank upon which he may 
 be endorser. This can also be done specifically in the case 
 of a negotiable note by the endorser waiting "w'aiving demand 
 notice and protest" and signing his name a second time under- 
 neath. 
 
 Warranty. — An agreement to hold oneself responsible for a certain 
 thing if it docs not (urn out as represented. If gi\en at the 
 time of sale, no further consideration is necessary, but, if given 
 afterwards, it will hold good only if some consideration was 
 given tliorefor. 
 
 Watering Stock. — The act of increasing the face value of stocks or 
 shares after making an equi\alenl increase in the value of 
 the assets they represent. 
 
 Otherwise known as overcapitalization, means the in- 
 creasing of the number of shares of an incorporated company 
 without a corresponding increase in the \alue of the assets. 
 This term is doubtless often misunderstood. There is a legiti- 
 mate goodwill \alue attached to many concerns, and, if this 
 goodwill is purchased at a legitimate valuation, it is not water- 
 
Glossary of Financial Terms 235 
 
 ing stock if stock is issued in payment. The same is true of 
 stock issued in payment of franchise or patent rights. The 
 asset does not require to be tangible in order to have a legiti- 
 mate value. It is when these or other assets are shown at 
 an inflated valuation that we have the process of watering stock. 
 The point to be considered, then, is not what the stock is given 
 for merely, but the relationship that exists between the real 
 value of the asset, whether it be property or services, and the 
 value at which it is taken as a basis for the issue of stock. 
 
 Way Bill. — A document giving a list of goods shipped. 
 
 Wharfinger. — The owner of a wharf who maintains it for the purpose 
 of receiving and shipping merchandise. 
 
 Wholesale.— The sale of the whole; i.e., the sale of goods in large 
 quantities or unbroken packages. 
 
 Winding Up.— By winding up a company is meant the closing up 
 of all the business transactions and finance, the realization of 
 its property, payment of creditors so far as may be possible, 
 and the distribution of any surplus among its shareholders. 
 
 While being wound up, a company is said to be in liquida- 
 tion, but it does not necessarily follow that it is insolvent, 
 since winding up is the only method by which a company can 
 cease operations and close up its affairs. 
 
 With Exchange. — When these words are written on a draft, any 
 charge for collection must be paid by the drawee in addition 
 to the face amount of the draft, and this latter amount in full 
 must be remitted the drawer. Must not be confounded with 
 "In Exchange" (q.v.). 
 
 Without Prejudice.— Without detriment to any right or condition 
 that previously existed. This expression is usually made use 
 of in any letter offering to compromise a claim or litigation, thus 
 reserving all rights, expressed or implied, to the writer in case 
 the offer is rejected ; in other words, his position remains exactly 
 as it was before the letter was written. In giving a report on 
 the financial standing, etc., of a customer to a correspondent, 
 a banker invariably heads his letter "Confidential and without 
 prejudice to the bank or the writer." 
 
Glossary op Financial Terms 
 
 Without Recourse. — Words sometimes written by an endorser on a 
 bill of exchange or promissory note, though the French phrase 
 ''sans recoiirs'' is more common. The person so signing does 
 not assume any liability in the case of non-payment. The 
 phrase is generally used when the endorser has no personal 
 interest in the transaction and has acted only as agent. 
 
 Without Reserve. — A term indicating that when goods are offered 
 for sale at auction, they will be sold absolutely to the highest 
 bidder, and that neither the vendor nor his agent shall bid at 
 the auction. 
 
 Writ. — A precept in writing issued from a court requiring the per- 
 formance of a certain act, or giving the authority to do it. 
 
-^™l™ OF 25 CENTS 
 
 ^AY AND TO $..00 onTh °^"^'^^'^OURTH 
 
 OVERDUE. °^ ^"e: seventh day 
 
^^l 
 
 Aly^o 
 
 ^D 0553 
 
 -- '' t ' 
 
 357336 
 
 
 UNIVERSITY OF CALIFORNIA LIBRARY 
 
 
:mH::nHSHa5n:i|^jiH|||t|p^^^