Exchange Rate
In this topic, you will learn how exchange rates work and how to apply them to convert between different currencies. You will explore key concepts such as buying and selling rates, and understand how to calculate the amount of money received or spent when exchanging currencies.
Related Lessons:
Perform Exchange Rate Conversion
Exchange rate is the rate to convert between a currency pair. For example, if we wanted to travel from Singapore to Thailand, we will need to exchange from Singapore Dollars (SGD) to Thai Baht (THB).
We perform either a multiplication or division during the rate conversion. To know whether to perform a multiplication or division, we look at the relative “size” of the value. If the currency you have is smaller in value compared to the currency you want, you usually multiply. If it is larger, you usually divide.
Exchange With Buy Sell Rate
Sometimes, students are given the buy and sell rates for a currency pair. These rates are commonly used in banking and finance. The key question is: which rate should you use?
First, you need to decide whether the currency conversion requires multiplication or division.
Next, to determine whether to use the buy or sell rate, perform the calculation using both rates. The rate that gives the lesser value (for the amount you are paying or receiving) is the correct one to apply.
Example 1
Aaron goes to a bank to change $100 into Riyals.
The bank changes $2.40 fees, and changes the rest of the money at the rate of $1=3.75Riyals.
How much does Aaron receive in Riyals?
Example 2
The train fare from Bangkok to Chiang Mai is 768 Baht.
The exchange rate is £1=48 Baht.
Calculate the train fare in pounds (£)
Example 3
Agnes travelled from Johannesburg to Cairo.
She change 500 Egyptian Pounds (EGP) to South African Rand (ZAR) when the exchange rate was 1EGP=1.24ZAR.
Calculate the amount she received.