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IB Math Studies Topic 8 – Financial Math: Exchange rates

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Buying and selling rates Exchange rates at First Cape Bank $1 USBuyingSelling £ Euro Aus $ Yen9896 First note the difference between the buying and the selling rates. This is how the bank makes part of its profit. If a customer has US$200 and she wants Euro: If a customer has 5000 Yen and he wants US$: Use the selling price. Use the buying price.

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Using exchange rates Exchange rates at First Cape Bank $1 USBuyingSelling £ Euro Aus $ Yen Lidia is going on holiday to Australia. She is taking US$1200 as spending money. a) Calculate how many Aus$ will she have when she exchanges all her US$. b) On returning to the US she has Aus$250 left. How many US$ will she have after exchanging them at the bank? 2. Sam arrives in the US with £460 and exchanges all this with the bank into US$. How many US$ will he have?

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Commission rates Banks may also charge a commission rate, this is a sum for performing the exchange. This could be a fixed charge or as a percentage charge of the exchange rate. Fixed rate The First Bank offers an exchange rate of £1=$1.64 with a fixed rate of £5 per transaction. Calculate how many $ you would receive for £350. Percentage charge The Seconds Bank offers an exchange rate of £1=$1.66 with a commission rate of 2.2%. Calculate how many $ you would receive for £350.

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Questions 1. Convert £300 into $ at a rate of £1=$1.56 with a fixed commission rate of £5. 2. A bank exchanges $ at a commission rate of 1.5%. Convert $500 into Yen at a rate of $1=95 Yen. 3. A bank buys Euros at $0.9 and sells at $0.86. Calculate how many Euros a customer with $400 will receive. 4. Convert $300 into £ if $1=£0.68 and the bank charges $3 commission. 5. A bank buys $ for £1=0.59 and sells for £1=0.57, with a 1.7% commission charge. Alfie has £870, how many $ will he receive? 344 Euros £ $

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Practice page 457 (Exercise 15A.1) page 460 (Exercise 15A.2) page 462 (Exercise 15A.3)

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