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Foreign Currency Exchange Rates
The “rate of exchange” is the ratio used to convert between currencies, such as
£s and euros. For a fixed rate, the number of euros is directly proportional to
the number of £s. Until recently European countries still had their own
currencies, such as French francs, pesetas and deutschmarks. For example:
10 francs is equivalent to £1 (10 francs = £1). The rate is 10 francs per £
Example 1
If the value of £1 is 200 pesetas, write the peseta to £ ratio in its simplest form.
1 peseta:£1 = 1 peseta:200 pesetas = 1:200
Example 2
If £1 = 200 pesetas i) How many pesetas do you get for £15? ii) Change 1850
pesetas into £s
i)
£1
=
200 pesetas
£15
=
200 × 15 pesetas
=
3000 pesetas
ii)
200 pesetas
=
£1
Use the method of one (divide by 200) to obtain the £s for 1 peseta.
1 peseta
=
£1 ÷ 200
=
£
1
200
1850 pesetas
=
£
1
200
× 1850
=
£9.25
or, using fractions:
1850 pesetas
=
1850
200
= £9.25
In the fractions method, we divided the 1850 pesetas by 200, because the peseta
is worth less than £1 - only one-two hundredth of £1. It follows that the
number of £s is one-two hundredth of the equivalent number of pesetas. If
that’s confusing, try this ‘common sense’ explanation for doing conversions.
In the example, you are converting pesetas to pounds sterling. The rate is 200
pesetas to the £. You have to decide whether to multiply by 200 or to divide.
When you convert you must get fewer pounds than pesetas because the pound is
worth more than the peseta. What do you do? Do you multiply by 200 or
divide. Clearly, to get a smaller number for the pounds, you must divide the
number of pesetas by 200.
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