In order to solve this question, you need to take a look at the following two qu

Question

In order to solve this question, you need to take a look at the following two questions:


Over $600 Over $12 When You Exchange European Euro 442 EUR 932 EUR 819 GBP 12 20,597 MXN 8,417 HKD United Kingdom Pound 388 GBP 2,202 JP Japanese Yen Mexican Peso Hongkong Dollar 57,933 JPY 9,764 MXN 3,990 HKD South Korean Won 565, 743 KRW 1,193,364 KR Australian Dollar Chinese Yuan Renminbi Canadian Dollar 668 AUD 3,360 CNY 659 CAD 1,866 AED 1,409 AUD 7,087 CNY 1,391 CAD UAE Dirham 3,935 AED All rotes are subject to change without notice Was he better off (and by how much?), if he has exchanged his $600 in Chicago?

Explanation / Answer

Answer 1

Exchange rate:

1 Euro = 1.3730 USD

So when 600 USD are converted

600 x 1 / 1.3730 = 437 Euro

also there is 1.25% commission with a minimum of 4.24 Euro

Net amount received = 437 - (437 x 1.25%) = 431.54 Euro

However if he would have converted USD 600 in Chicago, he would have got 442 Euro

Hence in terms of Euro, he would be better off by 442 - 431.54 = 10.46 Euro

If he would have converted the Euro back to Dollar, then

1 Euro = 1.16 USD

Thus 442 Euro would be 442 x 1.16 = 512.72 USD

Net amount after paying commission will be 512.72 - (512.72 x 1.25%) = 506.31 USD

Loss in the round trip transaction is $600 - $506.31 = $93.69

Hence he would be better off by 105.67 - 93.69 = $11.98, if he would have cnverted USD to Euro in Chicago

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