UNIT 2: GOVERNMENT FINANCE

FOREIGN EXCHANGE

2 decisions to make…

1) BUY or SELL? BE SURE YOU USE

THE CORRECT COLUMN IN THE CHART!Is the bank SELLING you money from another country OR is the bank BUYING back this money from you when you return (and giving you back Canadian $)???It is often OPPOSITE of what you first think!!It is what the bank is doing, not what you are doing!

2) MULTIPLY or DIVIDE?BE SURE YOU USE

THE CORRECT MATH OPERATION!

If you know how many foreign ‘dollars’ you want, then MULTIPLY this amount by their value in the chart to determine the total cost.

vs.

If you have a certain amount of Canadian money and you don’t know how much you can get for it, then DIVIDE their value into how much $ you have to determine how many you can afford.

Look at the BUY and SELL columns. Notice that the bank always SELLS money for MORE than they BUY it back!

This means that you get back less than you started with if you switch your money into another currency and then back into Canadian. This is another way the bank makes money.

Important:The chart column you pick

(buy vs. sell) has nothing to do with your choice to x or ÷ !!!

These are 2 separate decisions.

Ex 3 p. 86=1500 x 0.9666 (bank SELLING rate)=$1449.90

Ex 4 p. 87= 500 ÷ 0.0148 (bank SELLING rate)=33783.78 yen

Ex 5. p. 88= 15000 x 0.2131 (bank BUYING rate)= $3196.50

• Use all decimals from the chart and only round off final answers to 2 decimal places for dollars & cents.

• Do #2-8 • Show your work! Including chart # and x or ÷ !

Answers:

2) $297.403) $33.504) 200.34 Scottish pounds5) $12066) $19147) $80.158) 1617.25 pesos $205.55 You get back less than your original $300 because the bank buys the pesos back for less than they sold them to you for in the first place!