FM.2 Currency Exchange

Exchange Rates: An exchange rate is a rate that specifies how much one currency is worth in terms of the other. Also known as the foreign-exchange rate. Exchange rates change daily.

Example: Vacation in the US Andrea is travelling to New York for two weeks in the summer. The day she exchanges her money, C$1 = US$0.7624 Andrea exchanges C$1500. How much does she get in American Currency?

(b) At the end of her trip, Andrea converts the money she has left back to Canadian dollars. At that time, the bank offers a buying rate of US$1=C$1.1283. Andrea has US$25 left. What is this worth in Canadian currency?

Bank Buy and Sell Rates Buying Rate: The rate at which the bank pays for foreign currency (when they are buying it from you). Selling Rate: The rate at which the bank sells you foreign currency Exchange rates can change multiple times a day. They are affected by: Interest rates Employment outlook Economic growth expectations Trade balance (a country’s exports minus their imports Central Bank Actions

The table below shows that it costs the customer C$1.0527 to buy 1 USD. It also shows that the bank will pay customers C$0.9957 for each American dollar. Calculate the value of C$500 in US currency. Calculate the amount of Canadian currency you will receive if you immediately exchange the amount of US currency in (a) back to Canadian currency.

Example: Your Turn on page 27 Marcel needs a new ATV winch for a quad vehicle. He can purchase one at a local supply shop for $160.00. He searched online and found one for US$129.97. The charge for shipping and handling is US$6.50. When Marcel checked the exchange rate, he found the following information: Calculate the cost in Canadian dollars of the part online. Where should Marcel buy the winch?

This table shows that 1 CAD = 0.994946 USD and 1 USD = 1.00599 CAD. The part online cost $129.97 plus $6.50 for a total of 136.47 USD. In Canadian dollars, this is: Since this is the cheaper of the two options, Marcel should buy the part online.