Jacob is returning to Ireland from a trip to visit his friend in Poland. The unit of currency in Poland is called the zloty (zł). Jacob has 400 zloty (zł) and wants to convert them to euros. If the exchange rate is 4·17 zł = €1 , how much, to the nearest euro, will he receive?
Solution
In the retail currency exchange market, diff erent buying and selling rates will be quoted by money dealers. Most trades are to or from the local currency. When going abroad, you need to change money to the currency of the country you are visiting. It is important to know the exchange rate and amount of commission charged to get the best possible deal.
If you want to change a diff erent currency into euros, the institution will buy the foreign currency from you at the ‘we buy’ rate.
If you want to change euros into a diff erent currency, the institution will sell you this currency at the ‘we sell’ rate. They will usually charge a commission as well. This is an extra charge for their service.
Worked example 3 New Zealand dollars (NZD) 1·79
In general, the ‘we buy’ rate will be higher than the ‘we sell’ rate. Take care to use the correct rate when answering a question where you are given two rates.
Kai wants to visit his parents in New Zealand. He needs to change €800 into New Zealand dollars (NZD). He visits his local bank and the exchange rate available is shown below. We sell We buy 1·66
(i) How many New Zealand dollars will Kai get for €1 000? (ii) If the bank charges a commission fee of 2·5% of the euro value, how much will Kai have to pay for the transaction?
(iii) When Kai returns to Ireland, he has $350 New Zealand dollars left. He wants to exchange these for euros. How much, to the nearest cent, will he receive?