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Sam wants to download some music from the Internet. He has spent a long time researching and has found three companies who seem to offer the best deals. One is based in the UK, one in the USA and one in Germany. These are the prices they are charging for registration: ◦ Tunes unlimited [UK company] - £30 ◦ EZiest download [USA company] - $50 ◦ Musikwik [German company] - €50 He found out that the exchange rates were: £1 = $1.85 £1 = €1.45 Which would be the best deal for Sam? Sam wants to download some music from the Internet. He has spent a long time researching and has found three companies who seem to offer the best deals. One is based in the UK, one in the USA and one in Germany. These are the prices they are charging for registration: Tunes unlimited [UK company] - £30 EZiest download [USA company] - $50 = 50/1.85 = £27.03 Musikwik [German company] - €50 He found out that the exchange rates were: £1 = $1.85 £1 = €1.45 Which would be the best deal for Sam? Sam wants to download some music from the Internet. He has spent a long time researching and has found three companies who seem to offer the best deals. One is based in the UK, one in the USA and one in Germany. These are the prices they are charging for registration: Tunes unlimited [UK company] - £30 EZiest download [USA company] - $50 = 50/1.85 = £27.03 Musikwik [German company] - €50 = 50/1.45 = £34.48 He found out that the exchange rates were: £1 = $1.85 £1 = €1.45 Which would be the best deal for Sam? Sam wants to download some music from the Internet. He has spent a long time researching and has found three companies who seem to offer the best deals. One is based in the UK, one in the USA and one in Germany. These are the prices they are charging for registration: Tunes unlimited [UK company] - £30 EZiest download [USA company] - $50 = 50/1.85 = £27.03 Musikwik [German company] - €50 = 50/1.45 = £34.48 He found out that the exchange rates were: £1 = $1.85 £1 = €1.45 Which would be the best deal for Sam? A business sells exercise equipment to companies in a variety of different countries. Its cycling machine has a price in the UK of £250. How much the equipment would sell for in the following countries: United States Germany Turkey Australia Japan Canada £1 = US Dollar 1.97 Euro 1.52 Turkish Lira 2.76 Australian Dollar 2.54 Japanese Yen 239 Canadian Dollar 2.33 Remember Rule To change pounds into another currency, multiply by the rate. E.g. at £1 = €1.48, £50 changed into Euro would be 50 x 1.48 = €74. A business sells exercise equipment to companies in a variety of different countries. Its cycling machine has a price in the UK of £250. How much the equipment would sell for in the following countries: United States = $492.50 Germany = €380 Turkey = 690 Lira Australia = AUS$635 Japan = 59750 Yen Canada = Can$582.50 £1 = US Dollar 1.97 Euro 1.52 Turkish Lira 2.76 Australian Dollar 2.54 Japanese Yen 239 Canadian Dollar 2.33 £1 = Danish Kroner Mexican Peso Indian Rupees Taiwan Dollars The same business buys in a number of parts for its exercise bicycle from different countries. Use the currency tables to calculate how much it will have to pay for the parts if they are priced in the home country as follows: Denmark - Kr150 Mexico - Peso 500 India - Rupees 750 Taiwan - Taiwan Dollars 690 11.30 21.52585 86.47 64.84 Remember Rule To change a foreign currency back into pound, divide the sum by the rate. E.g. to change €90 into pounds, divide 90 by 1.48 = £60.81 The same business buys in a number of parts for its exercise bicycle from different countries. Use the currency tables to calculate how much it will have to pay for the parts if they are priced in the home country as follows: Denmark - £13.27 Mexico - £23.23 India - £8.67 Taiwan - £10.64 £1 = Danish Kroner Mexican Peso Indian Rupees Taiwan Dollars 11.30 21.52585 86.47 64.84 If the value of the £ Increases, Imports are cheaper, therefore Exports are more expensive. So the opposite is then true; If the value of the £ decreases, Imports are more expensive, therefore Exports are cheaper. Mini Plenary -- Sports Shop Imports Trainers cost you €30 and you want to sell them for £40 Exchange Rate May £1 = €1.47 June £1 = €1.39 July £1 = €1.43 Total cost of 200 trainers [in £] More expensive or cheaper than in the previous month? Mini Plenary -- Sports Shop Imports Trainers cost you €30 and you want to sell them for £40 Exchange Rate May £1 = €1.47 June £1 = €1.39 July £1 = €1.43 Total cost of 200 trainers [in £] £4082 More expensive or cheaper than in the previous month? Mini Plenary -- Sports Shop Imports Trainers cost you €30 Exchange Rate Total cost of 200 trainers [in £] May £1 = €1.47 £4082 June £1 = €1.39 £4317 July £1 = €1.43 More expensive or cheaper than in the previous month? More expensive Mini Plenary -- Sports Shop Imports Trainers cost you €30 Exchange Rate Total cost of 200 trainers [in £] More expensive or cheaper than in the previous month? May £1 = €1.47 £4082 June £1 = €1.39 £4317 More expensive July £1 = €1.43 £4196 Cheaper A UK fruit wholesaler buys bananas from a supplier in Honduras. The Honduran seller wants to be paid in US dollars. A bunch of ten bananas is currently selling for $20 each. The exchange rate is currently £1 = $1.75. Q1. How much does the UK buyer have to pay, in pounds, for each bunch of bananas? ◦ The exchange rate between the pound and the dollar changes. The pound has appreciated against the dollar and is now standing at £1 = $1.80. Q2. How much will a bunch of bananas now cost the UK importer? Q3. Given your answer to the question above, what do you think might be the effect on the UK importer of the change in the exchange rate? A UK fruit wholesaler buys bananas from a supplier in Honduras. The Honduran seller wants to be paid in US dollars. A bunch of ten bananas is currently selling for $20 each. The exchange rate is currently £1 = $1.75. Q1. How much does the UK buyer have to pay, in pounds, for each bunch of bananas? £11.43 ◦ The exchange rate between the pound and the dollar changes. The pound has appreciated against the dollar and is now standing at £1 = $1.80. Q2. How much will a bunch of bananas now cost the UK importer? £11.11 Q3. Given your answer to the question above, what do you think might be the effect on the UK importer of the change in the exchange rate? Stronger £ reduces costs for the importer If the value of the £ Increases, Imports are cheaper, therefore Exports are more expensive. So the opposite is then true; If the value of the £ decreases, Imports are more expensive, therefore Exports are cheaper. Explain in detail the meaning of import and export and why is it affected by exchange rates (5 Marks)