MFM 2P Lesson 7: Foreign Exchange Rates
When you buy money to go to another country, you will probably
not pay a 1:1 ratio for each dollar you spend. For example, you spend
$200 CAD (Canadian dollars) to buy US money. But the teller at the
bank only gives you $180 USD (US dollars). this is because of the
foreign exchange rate. Some days you may get more than $200, some
days you get less and rarely you will get the same (when this happens,
we say our dollars are at parity or on par). There is a foreign exchange
rate for each country’s currency.
While on vacation in the US, Jay made several credit card purchases.
He bought an iPod for $115.50 USD. The amount on his statement for
that purchase was $172.38 (CAD). What was the exchange rate, to
four decimal places, on the day he bought the iPod?
Exchange rate = (amount billed to you on your credit card)/(amount
paid the day you bought the item)
Or, another way to think of it is:
Exchange rate = (amount paid in CAD)/(amount paid in foreign
= (Canadian money spent)/(foreign money spent)
= $1.4925 per US dollar
This means that each US dollar costs $1.4925 Canadian dollars. OUCH!
For a trip to England, Helga bought £500 (500 pounds) at the rate of
$2.3721/£. How much did the British pounds cost her?
Since dollars are to be found, start with the British Pounds.
£1 costs $2.3721
so £500 costs $2.3721 x 500 = $1186.05
Therefore, the £500 of English money costs Helga $1186.05 Canadian!
A) You go to the US for a weekend and pay $20.19 for a great meal at
a fancy restaurant. When your credit card bill comes in, you notice
that the cost of the meal was charged as $22.97. What was the
exchange rate on that day to 4 decimal places?
B) Leena bought 50 000 Japanese yen at an exchange rate of
$0.01372/yen. (about 1.4¢). How many dollars did she pay for the
yen she bought?
C) A Canadian company invested € 1 703 926 (Euros) in a European
business. How many Canadian dollars were invested at an exchange
rate of $1.4672 CAD/Euro (€ 1= $1.4672 CAD)