1.4 Currency and Exchange Rates

• Currency facilitates trade and commerce by providing a common medium of exchange
• The base currency in an exchange rate table is the currency you are exchanging from
• Strong economic growth in a country typically leads to currency appreciation
• What is the currency and symbol of the United Kingdom?

  British Pound, GBP
• What is the definition of a base currency in an exchange rate table?

  Currency exchanged from
• How many Euros would 100 British Pounds be converted to if the exchange rate is 1 GBP = 1.16 EUR?

  116 EUR
• When comparing exchange rate offers, it is important to check the exchange rate and any additional fees.
• What is the definition of an exchange rate?

  Rate to exchange currencies
• What does the sell rate in an exchange rate table represent?

  Rate to purchase target currency
• What happens to the exchange rate when demand for a currency increases?

  Increases
• Match the currency with its symbol:

  US Dollar ↔️ USD

  Euro ↔️ EUR

  British Pound ↔️ GBP

  Japanese Yen ↔️ JPY
• The Japanese Yen is symbolized as CNY.

  False
• What is the role of a target currency in an exchange rate table?

  Currency exchanged to
• Steps to calculate net conversion amount with commission and fixed charges:

  1️⃣ Calculate the commission

  2️⃣ Subtract the commission from the base currency amount

  3️⃣ Calculate the fixed charges

  4️⃣ Apply the exchange rate

  5️⃣ Subtract the fixed charges
• Match the provider with the total cost for converting 1000 USD to EUR:

  Bank A ↔️ 915 EUR

  Exchange B ↔️ 919 EUR

  Online Platform C ↔️ 928.14 EUR
• Higher demand for a currency increases its exchange rate
• Currency facilitates trade and commerce between countries.


  True
• Higher inflation in a country tends to increase the value of its currency.

  False
• What is the currency and symbol of the United States?

  US Dollar, USD
• Match the currency with its country:

  Chinese Yuan ↔️ China

  Canadian Dollar ↔️ Canada

  Australian Dollar ↔️ Australia

  Swiss Franc ↔️ Switzerland
• If the exchange rate for USD to EUR is 0.85, it means 1 USD can be exchanged for 0.85 EUR.


  True
• Commission is typically a fixed fee for currency conversion services.

  False
• What is the role of currency in the international economy?

  Medium of exchange
• Higher inflation in a country increases the value of its currency.

  False
• Order the factors affecting exchange rates from most to least significant:

  1️⃣ Supply and Demand

  2️⃣ Inflation

  3️⃣ Interest Rates

  4️⃣ Economic Performance
• How do higher interest rates in a country affect its currency's exchange rate?

  Increase
• Which currency is used in the European Union?

  Euro
• An exchange rate table includes both buy rates and sell rates.
• The formula for converting currencies is: Amount of Target Currency = Amount of Base Currency × Exchange Rate.
• What is the net conversion amount for 500 USD to EUR with a 2% commission, a fixed charge of 5 EUR, and an exchange rate of 1 USD = 0.85 EUR?

  411.50 EUR