EXAMP

EXAMP. Edinburgh draws on London for 860 l. exchange at 1½ per cent. How much money must be paid at Edinburgh for the bill?

To avoid paying the premium, it is an usual practice to take the bill payable at London a certain number of days after date; and in this way of doing, 73 days is equivalent to 1 per cent.

The course of exchange betwixt nation and nation naturally rises or falls according as the circumstances and balance of trade happen to vary. Now to draw upon and remit to foreign places, in this fluctuating state of exchange, in the way that will turn out most profitable, is the design of arbitration. Which is either simple or compound.

In simple arbitration the rates or prices of exchange from one place to other two are given; whereby is found the correspondent price between the said two places, called the arbitrated price, or par of arbitration: and hence is derived a method of drawing and remitting to the best advantage.