9. American quotations.—Sterling rates are quoted in the United States and Canada at so many dollars and cents to the pound sterling, $4.85, $4.86% and so on. There are two methods of progression; namely, advancing by eighths of a cent $4.85, $4.85%, $4.85%, and advancing by five one-hundredths of a cent per pound (.05 cent), $4.8510, $4.8515, $4.8550 and so on. The latter is, of course, the closer quota tion and is used in market transactions.
10. Conversioit.—In actual practice conversions are generally made with the aid of exchange tables, but every operator should be able to make the neces sary calculations for himself.
Sterling currency is non-decimal: £1 = 20 shillings = 240 pence = 960 farthings .05 = 1 shilling = 12 pence = 48 farthings = 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.
To reduce shillings and pence to the decimal of a pound, multiply the shillings by .05, and the pence by .004%. The reason of this is apparent.
is = .05 of a pound.
Id = .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 £15.00 .05x8 .40 • .004%x7 £15.429% 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 O'5 .004%) or „ The rules for conversion are English money into dollars : Multiply the amount in pounds by the rate per pound.
12,500 at 4.8635 = 2,500 X 4.8635 = $12,158.75 Dollars into English money : Divide the amount in dollars by the rate per pound.
$2,500 at 4.8635 = - £514.0331 = £514. 0. 8.
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 by multiplying by 15/73.
11. Profits.—When a profit of so much per pound is desired, no calculation is necessary. A cent ad vance per pound means one dollar per £100 or ten dollars per 11,000; a point advance per pound (.01 cent) gives ten cents on £1,000 and five points (.05 cent) per pound means a profit of 50 cents per £1,000. One eighth of a cent advance gives 12% cents per £100.
When the profit is figured on the dollar value it will be, roughly, double the advance in the rate (4.87 X 2, or double the value of a pound, being nearly $10). An advance of five points means a profit of 10% cents per $1,000, and an advance of fifty 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 per cent should be made, or from sixty points to a cent and a quarter a pound, accord ing 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.
12. Purchase of bills of all exchange business in sterling is transacted by cable or by demand and sixty-day bills, and quota tions are generally furnished accordingly. Occa sionally, however, it is necessary to make a quota tion on some special dating, such as 30 or 90 days, and examples are therefore given below.
Making the allowances for stamps already noted and calculating interest at the appropriate rate the following table will be found serviceable: • Examples showing how the rates for different kinds of bills are calculated (as a matter of conven ience the calculations are based on £100).
In Canada the above calculations would be affected by the discount or premium on New York funds. In the last example if New York funds had been at %4 of 1 per cent discount it would have been necessary to have deducted 23 cents and the Montreal rate for a sixty-day draft would have been $4.84. premium would have made the rate $4.8440.