Exchange Rates

When you go abroad, you change pounds into the money used there, such as euros or US dollars. The exchange rate tells you how much of the other money you get for each pound.

For example, £1 = 1.15 euros means that every £1 you change gets you 1.15 euros. So £2 gets you 2.30 euros, and £10 gets you 11.50 euros.

In the exam you are asked to change an amount into or out of pounds, usually for 2 or 3 marks. Harder questions, for 3 to 6 marks, ask you to compare a price abroad with a price in the UK, to say which is cheaper or better value, or to work out a total cost in pounds. Most are on the calculator papers. On the non-calculator paper the numbers are easier, or you are asked to estimate.

Some questions give a conversion graph instead of a rate. Reading one is on the Conversion Graphs page. This page works with the rate.

To change pounds into the other currency, multiply by the rate. Each pound gets you 1.15 euros, so 40 pounds gets you 40 lots of 1.15 euros.

\text{euros} = \text{pounds} \times 1.15

So £40 is 40 \times 1.15 = 46 euros. You get more euros than pounds, because each pound is worth more than 1 euro.

To change the other currency back into pounds, do the opposite: divide by the rate.

\text{pounds} = \text{euros} \div 1.15

So 46 euros is 46 \div 1.15 = 40 pounds, back where we started. When you change into pounds here, you get fewer pounds than euros. Checking that your answer is bigger or smaller tells you whether you multiplied or divided the right way.

Sometimes the rate starts from 1 of the other currency, such as 1 euro = £0.88. Now multiplying gives pounds: 50 euros is 50 \times 0.88 = 44 pounds.

The rule is the same for both kinds of rate. Look at the side of the rate that says 1. If you have that currency, multiply. If you want that currency, divide.

You can also work out a rate. Leah changed £200 and got 236 euros. Divide the euros by the pounds: 236 \div 200 = 1.18, so the rate is £1 = 1.18 euros.

To compare a price abroad with a price in the UK, first put both prices in the same currency. Changing the foreign price into pounds is usually easiest. Then compare, and say which is cheaper.

Write money in pounds to 2 decimal places, which is the nearest penny. If your calculator shows 52.17391304, write £52.17. For an answer in pence, multiply by 100: £0.35 is 35p.

If the amounts are different, such as 500 g in one shop and 1 kg in another, find the cost of the same amount in both places as well, as on the Best Buys page.

Finish with a clear decision, and show the two values you compared.

Longer questions take a few steps. Write what each number is, pounds or euros, so you don't lose track. Keep all the figures on your calculator and round only the final answer.

Fees. If a fee is taken from the pounds first, take it off, then change what is left. A fee of 2\% of £300 is £6, so you change £294.

Whole notes. You can't get part of a bank note. With 470 euros, 470 \div 20 = 23.5, so you can have 23 twenty-euro notes. Round down here, even though 23.5 would normally round up: 24 notes would cost more than you have.

Money left over. Take what was spent away from what was changed, then change the rest back into pounds. Changing back is the opposite of changing out: divide by the rate if it starts from £1.

• Dividing when you should multiply, or the other way round. Look at the side of the rate that says 1: multiply if you have that currency, divide if you want it, and check the answer is a sensible size.
• Comparing prices in different currencies. Change one price so that both are in pounds, or both in euros, before you compare.
• Comparing different amounts. Find the cost of the same amount, or the pay for the same time, in both places.
• Rounding too early. Keep all the figures on your calculator until the final answer, then round to the nearest penny.
• Rounding up a number of bank notes. You can only get whole notes, so round down.
• Not giving a decision. Say which is cheaper or better value, and show the two values you compared.