Question

What is the price of 1 U.S. dollar in terms of each of the following currencies, given the following exchange rates? a. 1 curo \(=\$ 1.41\) b. 1 Chinese yuan \(=\$ .15\) c. 1 Israeli shekel \(=\$ .28\) d. 1 Kuwaiti dinar \(=\$ 3.60\)

Short answer

a. Curo b. Chinese Yuan c. Israeli Shekel d. Kuwaiti Dinar

Step-by-step solution

a. 1 curo = $1.41

To find the price of 1 dollar in terms of curo, we need to take the reciprocal of the given exchange rate. \[1 \text{ curo} = \$1.41 \Rightarrow \frac{1}{1.41} \text{ curo} = \$1\] So, the price of 1 U.S. dollar is \(\frac{1}{1.41}\) curo.

b. 1 Chinese yuan = $.15

To find the price of 1 dollar in terms of Chinese yuan, we need to take the reciprocal of the given exchange rate. \[1 \text{ Chinese yuan} = \$0.15 \Rightarrow \frac{1}{0.15} \text{ Chinese yuan} = \$1\] So, the price of 1 U.S. dollar is \(\frac{1}{0.15}\) Chinese yuan.

c. 1 Israeli shekel = $.28

To find the price of 1 dollar in terms of Israeli shekel, we need to take the reciprocal of the given exchange rate. \[1 \text{ Israeli shekel} = \$0.28 \Rightarrow \frac{1}{0.28} \text{ Israeli shekel} = \$1\] So, the price of 1 U.S. dollar is \(\frac{1}{0.28}\) Israeli shekel.

d. 1 Kuwaiti dinar = $3.60

To find the price of 1 dollar in terms of Kuwaiti dinar, we need to take the reciprocal of the given exchange rate. \[1 \text{ Kuwaiti dinar} = \$3.60 \Rightarrow \frac{1}{3.60} \text{ Kuwaiti dinar} = \$1\] So, the price of 1 U.S. dollar is \(\frac{1}{3.60}\) Kuwaiti dinar.

Key concepts

Currency Conversion

Currency conversion refers to the process of exchanging one currency for another. When you travel to a different country, you often need to convert your currency into the currency of that country so you can make purchases there. Currency conversion uses the current exchange rate between two currencies.

Exchange rates tell us how much one unit of a currency is worth in another currency. They vary and can fluctuate due to economic conditions, interest rates, and market speculation.
For example, if you have 100 U.S. dollars and the current exchange rate is 1 euro = $1.41, then you could convert your dollars into euros by dividing your dollars by the current exchange rate:

• 100 USD ÷ 1.41 = 70.92 euros.

Understanding how to convert currencies is crucial, especially for people involved in international business, travel, or foreign exchange trading.

Foreign Exchange

Foreign Exchange, often abbreviated as Forex or FX, is the global marketplace for exchanging national currencies against one another.

This market determines the exchange rates for currencies worldwide. It's continuous and operates 24/7, making it the most liquid financial market in the world.
Currencies are always traded in pairs, with the price being based on one currency against the other, such as EUR/USD or USD/JPY.
Some key principles to understand when it comes to foreign exchange include:

• Liquidity: The ability to quickly buy or sell currency pairs without causing a significant change in their exchange rates.
• Volatility: How drastically currency prices can change in a short period, which can be influenced by political events, economic updates, or market trends.
• Speculation: Traders often speculate on whether a currency will go up or down in value to make a profit.

Understanding these concepts is beneficial for anyone looking to better grasp how global financial systems link together, especially if you plan on engaging in foreign investments or international travel.

Reciprocal Calculation

Reciprocal calculation is a mathematical approach used to determine the cost of one currency in terms of another currency by taking the reciprocal of the given exchange rate. Essentially, if you know the rate of currency A in terms of currency B, you can find out how much currency B is in terms of currency A by flipping the rate.

For example, if the exchange rate tells you how many U.S. dollars equals one euro, and you need to know how many euros equal one U.S. dollar, you'll use:

• Take the reciprocal of the exchange rate. If 1 euro = $1.41, then 1 dollar = 1/1.41 euros.

This process might appear simple, but it’s a fundamental method for currency conversion when specific exchange rates are reversed.
Mastering reciprocal calculations can help ensure you're getting the correct amount of foreign currency when you plan to travel or conduct international transactions. Since currencies fluctuate, always check the current exchange rates before doing calculations to ensure accuracy.