An exchange rate is the rate at which one currency may be converted into another.
Discuss and discover
Research exchange rates from different fi nancial institutions, for example, the bank, credit union and post offi ce. Selecting one of these providers, convert: ●
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€1 into US dollars €2 into US dollars €3 into US dollars
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€10 into US dollars €100 into US dollars
Can you explain how to convert euros to US dollars to your friend? Can you fi nd a way to work backwards converting dollars back to euros?
When people travel to foreign countries, they must change their money into foreign currencies.
A foreign exchange rate is the price of one country’s currency in terms of another’s. Like all prices, exchange rates rise and fall.
The currency of Ireland is the euro. When we refer to foreign currency, we mean the money that a diff erent country uses, such as baht in Thailand or rupees in India.
Not all currencies have the same value. We use exchange rates to convert from one currency to another.
Solving problems involving currency exchange
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2 3
Write the given exchange rate such that the required currency is on the right-hand side.
Divide both sides by an appropriate value to get 1 on the left-hand side.
Multiply both sides to get the value required. Worked example 1
Cathy is planning to visit America for a holiday. She needs to exchange €500 into dollars for her spending money. If the exchange rate off ered is €1 = $1·12 , how many dollars should she receive?
Solution
Currency exchange is an example of a directly proportional relationship.
400 300 200 100 100 200 300 US dollars 400 500
By the end of this section you should: ● understand exchange rates ● be able to fl exibly convert diff erent currencies