Download Commission on Currency Exchange

IB MATH STUDIES 1
Name: ____________________________
Notes: Currency Conversions
If you visit another country or buy products from overseas, you usually have to use the
_______________________________ of that country. We use an _________________________
__________________ to find out how much your money is worth in the foreign currency, and
vice versa.
Exchange rates are constantly ________________________________, and so are published daily
in newspapers, displayed in bank windows and airports, and updated on the internet. The
rate is usually given as the amount of foreign currency equal to one unit of local currency.
First we consider currency conversions for which there is _________ _______________________.
This means that there are no fees to pay for making the currency exchange.
To perform these conversions we can simply multiply or divide by the currency
_________________________ ___________________ as applicable.
Conversions with NO Commission:
Example 1:
Example 2:
Example 3:
Example 4:
Example 5:
Commission on Currency Exchange
When a currency trader (such as a bank) exchanges currency for a customer, a
_________________________________ is often paid by the customer for the service. The
commission could vary from _________ % to __________ %, or could be a constant amount or
____________ ___________. Some traders charge no commission but offer worse exchange
rates instead. Suppose you live in the U.S. The table below shows how much one American
dollar (USD) is worth in some other currencies:
Example 6:
Example 7:
Example 8:
Example 9:
Example 10:
Example 11:
CURRENCY CONVERSIONS: Activity & Questions
In this activity, you will learn how to convert money between different currencies with the
use of an exchange rate table and a calculator. You will need a calculator
The Dollabill family is going on vacation and will be visiting many different countries. From
their home in New York they travel to Toronto (Canada), London (England), Rome (Italy),
New Delhi (India), Tokyo (Japan) and Canberra (Australia), before returning home across
the Pacific. The route is shown on the following map:
Mr. Dollabill uses his credit card to change money from USD ($US) to the local currency in
each of the locations the family visits. Because currencies fluctuate all the time, the
amount of money Mr. Dollabill receives in each local currency will change from day to day.
However, the following example table shows you how much ONE American dollar (USD) is
worth and will give you an idea of how currencies are converted & sold:
Currency
Code
Buys
Sells
Australian Dollar
AUD
1.0883
1.0601
Canadian Dollar
CAD
1.0681
1.0253
Euro
EUR
0.6819
0.6547
British Pound
GBP
0.6064
0.5821
Indian Rupee
INR
63.754
62.835
Japanese Yen
JPY
90.99
87.36
You will notice that there are two sets of figures for each country – Buy and Sell. This is
because you get one rate for changing from $US to the foreign currency and a different rate
for changing back from the foreign currency to the $US. This is how the banks make their
money. The banks also make a commission on every transaction, so they make even more
money out of us!
Group Members: _____________________________________________________________________
Fill in the amount spent in the correct currency.
Amount Spent in US
Dollars
Conversion to Correct Currency
Exchange (sell)
Starting US
5000.00
Spent in Canada
623.75
Spent in England
789.00
Spent in Italy
425.96
Spent in India
126.07
Spent in Japan
583.28
Money the bank makes
in conversion
Bank Price (buy)
Spent in Australia 896.30
1) How much money does Mr. Dollabill have remaining in US Dollars at the end of the trip?
2) How much money total did the bank make while converting Mr. Dollabill’s money?
3) Mr. Dollabill’s daughter has some other money left over from the following places. How
much will she receive in USD for:

2,000 Yen?

3,500 Indian Rupees?

70 Euro?
Potential Test Questions involving Currency:
1) A currency exchange service exchanges 1 Mexican peso for Thai baht using a buy rate of
2.584 and a sell rate of 2.4807. Sergio wishes to exchange 400 peso for Thai baht.
a) How many baht will he receive?
b) If he immediately exchanges the baht back to pesos, how many will he get?
c) What is the resultant commission for the double transaction?
2) A currency exchange service exchanges 1 Chinese yuan to Indian rupees with a buy rate
6.8086 and sell rate 6.56411. Lili wishes to exchange 425 yuan for rupees.
a) How much will he receive?
b) If he immediately exchanges the rupees back to yuan, how many will he get?
c) What is the resultant commission for the double transaction?
4) Find the price in American dollars of:
a) a computer worth 8000 Hong Kong dollars
b) a rugby ball worth 45 NZD
c) a watch worth 949 SAR
5) A bank exchanges UK pounds for a commission of 1.3%. A bank exchanges 500 UK
pounds to US dollars. The exchange rate is 1 UK pound = 1.8734 US dollars. Round
your answers to following questions to 2 decimal places.
a)
How much commission does the bank receive?
b)
How much does the customer receive for the transaction?
6) A bank exchanges 1 Botswana pula to Angolan kwanza with buy rate 13/527 and sell
rate 13.068. Kefilwe wishes to exchange 3200 pula to kwanza.
a) How much will he receive?
b) If he immediately exchanges the kwanza back to pula, how many will he get?
c) What is the resultant commission for the double transaction?
Potential Test Questions involving Currency:
1) A currency exchange service exchanges 1 Mexican peso for Thai baht using a buy rate of
2.584 and a sell rate of 2.4807. Sergio wishes to exchange 400 peso for Thai baht.
d) How many baht will he receive?
e) If he immediately exchanges the baht back to pesos, how many will he get?
f) What is the resultant commission for the double transaction?
2) A currency exchange service exchanges 1 Chinese yuan to Indian rupees with a buy rate
6.8086 and sell rate 6.56411. Lili wishes to exchange 425 yuan for rupees.
c) How much will he receive?
d) If he immediately exchanges the rupees back to yuan, how many will he get?
c) What is the resultant commission for the double transaction?
4) Find the price in American dollars of:
a) a computer worth 8000 Hong Kong dollars
b) a rugby ball worth 45 NZD
c) a watch worth 949 SAR
5) A bank exchanges UK pounds for a commission of 1.3%. A bank exchanges 500 UK
pounds to US dollars. The exchange rate is 1 UK pound = 1.8734 US dollars. Round
your answers to following questions to 2 decimal places.
a)
How much commission does the bank receive?
b)
How much does the customer receive for the transaction?
6) A bank exchanges 1 Botswana pula to Angolan kwanza with buy rate 13/527 and sell
rate 13.068. Kefilwe wishes to exchange 3200 pula to kwanza.
a) How much will he receive?
b) If he immediately exchanges the kwanza back to pula, how many will he get?
c) What is the resultant commission for the double transaction?