8. Profits.—When the rate is quoted at so many cents per franc, an advance in the rate of one-hun dredths of a cent (.01 cent) would of course mean one cent profit on Fcs. 100, or ten cents on Fcs. 1,000. The rule is to buy low and sell high.
Fcs. 1,000 at .193 would cost $193, and if sold at .1935 would realize $193.50, a profit of 50 cents or nearly 3/4 of 1 per cent. An advance of .01 cent in selling corresponds to a profit of about fifty cents per $1,000 or %o of 1 per cent. $1,000 would pur chase Fcs. 5,181.35 at .193, but at .1935 $1,000 would purchase only Fcs. 5,167.96, a difference of Fes. 13.39 or $2.54, representing 1/4 of 1 per cent profit on $1,000.
When franc quotations are used, a difference in the ' rate of % centime (.625 centime) corresponds ap proximately to % of 1 per cent on the dollar value or 12% cents per $100. The rule is to buy high and sell low. Fcs. 1,000 purchased at 5.15% would cost $193.94, and if sold at 5.15 would realize $194.17, a profit of .23 cents, or % of 1 per cent on 193.94. If sold at 5.15%+%6, $194.06 would be paid (193.94+ .12), and the profit reduced to MA of 1 per cent. $1,000 at 5.15% would purchase Fcs. 5,156.25, but $1,000 would purchase only Fcs. 5,150 at 5.15, a dif ference of Fcs. 6.25 or $1.25, representing a profit of Vs of 1 per cent on $1,000. If the rate was 5.15% + Ya2, the draft would be for Fes. 5,154.63 or Fes. 1.61 (313/4 cents) profit.
The profit on bills of exchange is always figured on the rate, not on the amount, as illustrated in the fol lowing example: What price should be paid for a sixty-day bill on Paris, check rate 5.15%, discount rate 3 per cent, to realize a profit of % of 1 per cent? Check rate 515.625 Interest 3%, 60 days .2.60 Stamp °6 Profit % of 1% 1 29 4.15 519.775 or 5.20 + %4 or 5.19%-%4.
9. Purchase of French long bills.—The sight rate is the basis from which the rates for long bills arc cal culated in New York. It should be carefully noted that, as the quotation is given at so many francs to the dollar, allowances for interest, stamp duty, etc., should be added.to the sight rate.
When 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 : Percentage If minus, add If plus, deduct fraction to rate from rate 70 Fcs. .00081 Fcs. 00081 " .00162 " .00162 .
" .00243 " .00243 " .00324 " .00324 Calculation can be simplified by the use of the fol lowing French Exchange Interest Table: Rate 3 days' 10 days' 30 days' 60 days' 90 days' per cent sight sight sight sight sight Basis Fcs. 520 520 520 520 520 V13 .003 .009 .027 .051 .081 1/2 .005 .018 .054 .108 .162 IA .011 .036 .108 .217 .32.5 1/2 .022 .072 .217 .433 .650 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 .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 7.800Stamps .26 .26 .26 .26 .26 The above figures are calculated on the basis of $100 being equal to 520 francs and 360 days per year.
Example 1, Paris check rate in New York is 5.18%, Bank of France discount rate 3 per cent, find the rate for 60-day bills. For convenience the calculation is made on the basis of $100.
Check rate 518.125 Add Stamp duty of 1% .26 Interest 60 days at 3% 2.60 2.86 520.985 or %4 arrived at as follows: 520.985 = 521.25 00.265, but Fes. .243 is equivalent to %4, and reversing the minus sign the quotation reads ± Example 2, Paris check rate in New York is Bank rate 3 per cent, find the rate for 60-day bills.
Check rate 518.125 Add %4 of 1% .081 (5.18%-%/4) 518.206 Add Interest at 3% 2.60 Stamps V20' of 1% .26 2.86 521.066 or 5.211/4 + %2 (521.25 -.162 or = 521.088).
In Canada the calculations would of course be af fected by the discount or premium on New York funds; in the above example a premium on New York funds of 'A, would make the rate and a discount of would make it 5181/s-73.