This historic book may have numerous typos and missing text.
Purchasers can download a free scanned copy of the original book
(without typos) from the publisher. Not indexed. Not illustrated.
1896 Excerpt: ...and what relationship exists between the price of
a bill at three months, and the price of a cheque. To state a case,
say that I have made purchases in France, and the time having
arrived for payment, have the choice between remitting a cheque, or
a three months' bill; if the cheque would cost me 25.80 per 1, what
ought I to pay for the bill? Obviously the difference in price will
mainly depend on the rate of interest ruling in France--not on the
English rate--for either my correspondent will credit me for my
remittance in three months time, charging interest meanwhile at
French bank-rate on the balance due to him, or, as is more likely,
he will discount the bill with his banker, and credit me at once
for the proceeds. If bankrate is four per cent. in France, the
charge on a three months' bill will be one per cent., and I shall
therefore expect to buy the bill one per cent. cheaper than the
cheque, or at 25.55. The price I pay must also cover the expense of
the foreign bill-stamp ( per mille), which brings the rate up to
25.56J. Another consideration will also influence me. I shall be
under liability on my endorsement until the bill is actually paid,
and the longer it runs the greater will be the risk. In three
months time drawer and acceptor may have failed, or war might have
broken out. For this risk I must also be compensated by some
allowance in price, which is of the nature of an insurance premium,
and will be greater or less according to the standing of the other
parties to the bill, and to the general state of credit. If I tax
my chance of loss on that score at per mille, the result will be
that I shall consider 25.57 for a three months' bill as the
equivalent price to 25.80 for a cheque. The long rate, therefore,
is based wpon the sight ...
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