# Topic 8 – Financial Math:

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Topic 8 – Financial Math:
Exchange rates IB Math Studies

Exchange rates at First Cape Bank If a customer has US\$200 and she wants Euro: \$1 US Buying Selling 0.65 0.62 Euro 1.10 1.06 Aus \$ 1.95 1.88 Yen 98 96 Use the selling price. If a customer has 5000 Yen and he wants US\$: Use the buying price. First note the difference between the buying and the selling rates. This is how the bank makes part of it’s profit.

Using exchange rates Exchange rates at First Cape Bank \$1 US Buying
a) Calculate how many Aus\$ will she have when she exchanges all her US\$. \$1 US Buying Selling 0.65 0.62 Euro 1.10 1.06 Aus \$ 1.95 1.88 Yen 98 96 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? 1. Lidia is going on holiday to Australia. She is taking US\$1200 as spending money.

Commission rates Banks may also charge a commission rate, this is a sum for performing the exchange. 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. 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.

Questions 1. Convert £300 into \$ at a rate of £1=\$1.56 with a fixed commission rate of £5. 4. Convert \$300 into £ if \$1=£0.68 and the bank charges \$3 commission. £201.96 2. A bank exchanges \$ at a commission rate of 1.5%. Convert \$500 into Yen at a rate of \$1=95 Yen. 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? 3. A bank buys Euros at \$0.9 and sells at \$0.86. Calculate how many Euros a customer with \$400 will receive. \$ 344 Euros

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