# 30S Applied Math Mr. Knight – Killarney School Slide 1 Unit: Personal Finance Lesson: Foreign Exchange Foreign Exchange Learning Outcome B-1 PF-L5 Objectives:

## Presentation on theme: "30S Applied Math Mr. Knight – Killarney School Slide 1 Unit: Personal Finance Lesson: Foreign Exchange Foreign Exchange Learning Outcome B-1 PF-L5 Objectives:"— Presentation transcript:

30S Applied Math Mr. Knight – Killarney School Slide 1 Unit: Personal Finance Lesson: Foreign Exchange Foreign Exchange Learning Outcome B-1 PF-L5 Objectives: Perform Calculations relating to Foreign Exchange

30S Applied Math Mr. Knight – Killarney School Slide 2 Unit: Personal Finance Lesson: Foreign Exchange Banks and credit unions can supply foreign exchange rates on request. These rates fluctuate daily and, in fact, some rates change so often that these institutions will not quote the rates until the actual time of the transaction. For example, one day at 9:00 a.m. the US dollar might equal 1.5238 and at 1:00 p.m. the US dollar could be 1.5236. Theory – Unit Pricing Intro

30S Applied Math Mr. Knight – Killarney School Slide 3 Unit: Personal Finance Lesson: Foreign Exchange Did you know that people buy and sell money quite commonly? Let us suppose that you have 100 Canadian dollars and you want to convert them to American dollars for a trip to Florida. At the bank, you will hand over your money and receive the American money in return. In reality, the transaction that has taken place is that you sold your Canadian funds to the bank who paid you in American funds. Another way to look at the transaction is that you purchased American funds from the bank and used Canadian dollars as payment. Theory – Calculating Unit Prices

30S Applied Math Mr. Knight – Killarney School Slide 4 Unit: Personal Finance Lesson: Foreign Exchange In this example, Canadian currency is worth less than American; you didn't get \$100 American for \$100 Canadian. But there is more to the story. In our scenario, you have the good luck to get a credit card from your parents and you return home with the American dollars that you had purchased. You return to the bank to sell the American funds and are surprised to get less than the \$100 Canadian that you started with. It turns out that financial institutions make a profit on buying and selling currencies. They will buy back your American dollars for less money than you paid for them. Example – Calculating Unit Price

30S Applied Math Mr. Knight – Killarney School Slide 5 Unit: Personal Finance Lesson: Foreign Exchange The ways in which foreign exchange rates are stated by institutions vary, but most will state a buying rate and a selling rate. Some lists will state the values from the customer's point of view and others will state the values from the institution's point of view. This is sometimes confusing, but remember that the higher rate is always the rate at which the bank charges the customer and the lower rate is always the rate at which the bank will buy the currency from the customer. Theory – Other Factors

30S Applied Math Mr. Knight – Killarney School Slide 7 Unit: Personal Finance Lesson: Foreign Exchange Theory – Buying & Selling At your local bank, the buying rate for the Mexican peso is \$0.1454 and the selling rate is \$0.1660. These are the rates at which the bank will buy and sell. This means that if you (the customer) buy, you will pay their selling rate. For example, if you buy 200 pesos, they will sell them to you for \$0.1660 x 200 = \$ 33.20 CDN. Notice that there are two things happening. One is the difference in the value of the currencies, pesos compared to dollars. The other is the difference in the buy/sell rates. If you changed your mind and immediately wanted to sell the pesos back to the bank, you would receive \$0.1454 x 200 = \$29.08 CDN.

30S Applied Math Mr. Knight – Killarney School Slide 8 Unit: Personal Finance Lesson: Foreign Exchange Exchange Rate Table We will use the Currency Exchange table shown below for the calculations in the following examples. All decimal values represent Canadian Dollars.

30S Applied Math Mr. Knight – Killarney School Slide 9 Unit: Personal Finance Lesson: Foreign Exchange Test Yourself

30S Applied Math Mr. Knight – Killarney School Slide 10 Unit: Personal Finance Lesson: Foreign Exchange Test Yourself

30S Applied Math Mr. Knight – Killarney School Slide 11 Unit: Personal Finance Lesson: Foreign Exchange Test Yourself

Download ppt "30S Applied Math Mr. Knight – Killarney School Slide 1 Unit: Personal Finance Lesson: Foreign Exchange Foreign Exchange Learning Outcome B-1 PF-L5 Objectives:"

Similar presentations