Example: Find the amount and the compound interest of $1200 at 6% for two years, interest compounded semi-annually.
| Solution: | ||
| $1200. | 00 | First principal |
| 36. | Interest for 6 months | |
| 1236. | Principal at beginning of second 6 months | |
| 37. | 08 | Interest for second 6 months |
| 1273. | 08 | Principal at beginning of third period |
| 38. | 19 | Interest for third period |
| 1311. | 27 | Principal at beginning of fourth period |
| 39. | 34 | Interest for fourth period |
| $1350. | 61 | Amount at end of two years |
| $1350. | 61 | Amount at end of two years |
| 1200. | 00 | Principal |
| 150. | 61 | Compound interest. |
EXCHANGE
in commerce is a method of making payments in distant places, without the actual transmission of money, but by a Bill of Exchange called Draft, which is a written request upon one person to pay a certain sum to another or to his order. The person who orders the money to be paid, is called the Drawer; the one who is directed to pay it, the Drawee, and the one to whom it is directed to be paid, the Payee.
Domestic or Inland Exchange is exchange between places in the same country: Foreign Exchange, between different countries.
If, for every little business transaction, money had to be sent from one business center to another, much needless inconvenience and expense would be incurred.
A man in Chicago owes a man in New York City a sum of money. He can send it to him in one of five ways:—
- 1. By Check.
- 2. By Post-office Order
- 3. By Express Order
- 4. By Bill of Exchange
- 5. By Telegraph
Suppose Mr. White of Chicago owes Mr. Brown of Boston $200 for groceries and Mr. Allen of Boston owes Mr. Warner of Chicago $200 for rent. Wouldn’t it save expense and trouble if Mr. White should go to Mr. Warner and Mr. Allen to Mr. Brown? Thereby two debts are cancelled by two city transactions and no money need be sent from one city to another.