<< Chapter < Page Chapter >> Page >

Foreign exchange rates - (not in caps, included for completeness)

Is $500 ("500 US dollars") per person per night a good deal on a hotel in New York City? The first question you will ask is “How much is that worth in Rands?". A quick call to the local bank or a search on the Internet (for example on (External Link) ) for the Dollar/Rand exchange rate will give you a basis for assessing the price.

A foreign exchange rate is nothing more than the price of one currency in terms of another. For example, the exchange rate of 6,18 Rands/US Dollars means that $1 costs R6,18. In other words, if you have $1 you could sell it for R6,18 - or if you wanted $1 you would have to pay R6,18 for it.

But what drives exchange rates, and what causes exchange rates to change? And how does this affect you anyway? This section looks at answering these questions.

How much is r1 really worth?

We can quote the price of a currency in terms of any other currency, for example, we can quote the Japanese Yen in term of the Indian Rupee. The US Dollar (USD), British Pound Sterling (GBP) and the Euro (EUR) are, however, the most common used market standards. You will notice that the financial news will report the South African Rand exchange rate in terms of these three major currencies.

Abbreviations and symbols for some common currencies.
Currency Abbreviation Symbol
South African Rand ZAR R
United States Dollar USD $
British Pounds Sterling GBP £

So the South African Rand, noted ZAR, could be quoted on a certain date as 6,07040 ZAR per USD (i.e. $1,00 costs R6,07040), or 12,2374 ZAR per GBP. So if I wanted to spend $1 000 on a holiday in the United States of America, this would cost me R6 070,40; and if I wanted £1 000 for a weekend in London it would cost me R12 237,40.

This seems obvious, but let us see how we calculated those numbers: The rate is given as ZAR per USD, or ZAR/USD such that $1,00 buys R6,0704. Therefore, we need to multiply by 1 000 to get the number of Rands per $1 000.

Mathematically,

$ 1 , 00 = R 6 , 0740 1 000 × $ 1 , 00 = 1 000 × R 6 , 0740 = R 6 074 , 00

as expected.

What if you have saved R10 000 for spending money for the same trip and you wanted to use this to buy USD? How many USD could you get for this? Our rate is in ZAR/USD but we want to know how many USD we can get for our ZAR. This is easy. We know how much $1,00 costs in terms of Rands.

$ 1 , 00 = R 6 , 0740 $ 1 , 00 6 , 0740 = R 6 , 0740 6 , 0740 $ 1 , 00 6 , 0740 = R 1 , 00 R 1 , 00 = $ 1 , 00 6 , 0740 = $ 0 , 164636

As we can see, the final answer is simply the reciprocal of the ZAR/USD rate. Therefore, for R10 000 will get:

R 1 , 00 = $ 1 , 00 6 , 0740 10 000 × R 1 , 00 = 10 000 × $ 1 , 00 6 , 0740 = $ 1 646 , 36

We can check the answer as follows:

$ 1 , 00 = R 6 , 0740 1 646 , 36 × $ 1 , 00 = 1 646 , 36 × R 6 , 0740 = R 10 000 , 00

Six of one and half a dozen of the other

So we have two different ways of expressing the same exchange rate: Rands per Dollar (ZAR/USD) and Dollar per Rands (USD/ZAR). Both exchange rates mean the same thing and express the value of one currency in terms of another. You can easily work out one from the other - they are just the reciprocals of the other.

Questions & Answers

I'm interested in biological psychology and cognitive psychology
Tanya Reply
what does preconceived mean
sammie Reply
physiological Psychology
Nwosu Reply
How can I develope my cognitive domain
Amanyire Reply
why is communication effective
Dakolo Reply
Communication is effective because it allows individuals to share ideas, thoughts, and information with others.
effective communication can lead to improved outcomes in various settings, including personal relationships, business environments, and educational settings. By communicating effectively, individuals can negotiate effectively, solve problems collaboratively, and work towards common goals.
it starts up serve and return practice/assessments.it helps find voice talking therapy also assessments through relaxed conversation.
miss
Every time someone flushes a toilet in the apartment building, the person begins to jumb back automatically after hearing the flush, before the water temperature changes. Identify the types of learning, if it is classical conditioning identify the NS, UCS, CS and CR. If it is operant conditioning, identify the type of consequence positive reinforcement, negative reinforcement or punishment
Wekolamo Reply
please i need answer
Wekolamo
because it helps many people around the world to understand how to interact with other people and understand them well, for example at work (job).
Manix Reply
Agreed 👍 There are many parts of our brains and behaviors, we really need to get to know. Blessings for everyone and happy Sunday!
ARC
A child is a member of community not society elucidate ?
JESSY Reply
Isn't practices worldwide, be it psychology, be it science. isn't much just a false belief of control over something the mind cannot truly comprehend?
Simon Reply
compare and contrast skinner's perspective on personality development on freud
namakula Reply
Skinner skipped the whole unconscious phenomenon and rather emphasized on classical conditioning
war
explain how nature and nurture affect the development and later the productivity of an individual.
Amesalu Reply
nature is an hereditary factor while nurture is an environmental factor which constitute an individual personality. so if an individual's parent has a deviant behavior and was also brought up in an deviant environment, observation of the behavior and the inborn trait we make the individual deviant.
Samuel
I am taking this course because I am hoping that I could somehow learn more about my chosen field of interest and due to the fact that being a PsyD really ignites my passion as an individual the more I hope to learn about developing and literally explore the complexity of my critical thinking skills
Zyryn Reply
good👍
Jonathan
and having a good philosophy of the world is like a sandwich and a peanut butter 👍
Jonathan
generally amnesi how long yrs memory loss
Kelu Reply
interpersonal relationships
Abdulfatai Reply
What would be the best educational aid(s) for gifted kids/savants?
Heidi Reply
treat them normal, if they want help then give them. that will make everyone happy
Saurabh
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get Jobilize Job Search Mobile App in your pocket Now!

Get it on Google Play Download on the App Store Now




Source:  OpenStax, Siyavula textbooks: grade 10 maths [caps]. OpenStax CNX. Aug 03, 2011 Download for free at http://cnx.org/content/col11306/1.4
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Siyavula textbooks: grade 10 maths [caps]' conversation and receive update notifications?

Ask