What are currencies?
The currency used in the UK is pound sterling (£) - people in the UK are paid in £ and we buy and sell goods in £.
Other currencies that you might be familiar with are the euro (€) which is used in most of the EU countries and the US dollar ($).
If you are buying something in Spain for example, you must pay in euros but you will want to know how many £ you are actually spending.
To calculate this we use the exchange rate.
This tells us how many euros are equivalent to \(£1\).
The exchange rate between currencies changes all the time depending on the financial situations in different countries.
Worked example of exchange rates 1
Shannon is going on holiday to Spain.
She wants to have some cash for spending so she changes \(£150\) to Euro.
The exchange rate is \(\pounds 1 = \euro 1.13.\)
How many Euro does she get?
\(\pounds 1 = \euro 1.13\)
\(\pounds 150 = \euro 1.13 \times 150\)
\(= \euro 169.50\)
Shannon gets \( \euro 169.50\).
On a calculator the answer will be \(169.5\) but it is important to add a zero as there are 100 cents in a Euro.
Question
Nadiya is from New York and is on holiday in the UK.
She spends \(£35\) in a restaurant.
How many US dollars has she spent?
The exchange rate is \(£1 = $1.37\).
Answer
\(£1 = $1.37\)
\({£35} = {$1.37~}\times{~35}\)
\(= $47.95\)
Nadiya has spent \($47.95\).
Worked example of exchange rates 2
Marcus is on holiday in Spain.
He buys sun cream costing \(\euro 10\).
The exchange rate is \(\pounds 1 = \euro 1.13\).
How much has Marcus spent in £s?
\(\euro 1.13 = \pounds 1\)
\(\euro 1 = \pounds 1 \div 1.13\)
\(\euro 10 = \pounds 1 \div 1.13 \times 10\) (This is the same as \(10 \div 1.13\))
\(= 8.8495575 = \pounds 8.85\) (nearest penny)
Key points
To change from £ to a foreign currency, multiply by the exchange rate.
To change from a foreign currency to £, divide by the exchange rate.
Question
Jayden is shopping in Dublin.
He spends \(\euro 52.99\) on a sports top.
How much has he spent in £s?
The exchange rate is \(\pounds 1 = \euro 1.10\).
Answer
\(\pounds 1 = \euro 1.10\)
To change to £s, divide by the exchange rate.
\(\euro 52.99 \div 1.10 = 48.172727\)
\(= \pounds 48.17\) (nearest penny)
Watch: What are exchange rates?
Different currencies around the world mean exchange rates are key when spending your money in another country.
Ever heard of this guy? That fictional character who travelled around the world in 80 days?
Well, what if we told you one woman did it in 72 days?
Meet Nellie Bly.
Nellie Bly was a pioneer of investigative reporting in the 19th century and single-handedly changed the face of journalism across the world.
Our story begins in Derry/Londonderry.
A modern-day Nellie Bly, inspired by her famous namesake, tells the locals about her epic trip.
“I left with just two days' notice, with nothing but the coat on my back and, most importantly, the bag of different currencies that I kept around my neck.”
Currency is extremely important when travelling.
The currency that we use here in Northern Ireland is pound sterling.
Other countries have their own currencies, with different symbols and values. In each country that I travelled to, I spent money in that country's currency.
Bonjour from France.
Nellie is buying a model of the Eiffel Tower as a souvenir. It costs €25, but she wants to know how much it costs in pounds.
A sign in the shop shows the exchange rate. If €1 = £0.82, then:
25 × 0.82 = £20.50
So Nellie has spent £20.50 on her souvenir.
Nellie is in China. The currency here is the yuan.
She wants to buy a model of a Chinese warrior. The price is 138 yuan, which seems like a lot. But does that mean that it's expensive?
The exchange rate means that 1 yuan = £0.11, or 11p.
Nellie decides to estimate the cost in pounds. Because 1 yuan equals 11p, which is just a bit more than 10p, she multiplies 138 by 10:
138 × 10p = 1,380p = £13.80
So the souvenir costs around £14.
Not expensive at all.
Nellie travels on to Japan, where the currency is the Japanese yen.
She is just about to leave when she notices a pair of cute lucky charm cats. She really wants to buy them, but she has no yen left.
Will her £20 note be enough?
She sees a bank nearby and goes in to change her £20 into yen. There is a notice in the bank showing the exchange rate.
Nellie does a quick calculation:
20 × 0.000702 = 0.01404
She knows this can't be right. This is about 1p.
Nellie should have divided, not multiplied, by the exchange rate:
20 ÷ 0.000702 = 28,490.03
She will get 28,490.03 yen for her £20 note.
This is enough to buy her souvenir.
Nellie changes her money and hurries to the shop to buy the cats before she has to leave for her next destination.
“Now onto my next adventure.”
Travel around the world with a modern-day Nellie Bly to discover how exchange rates can affect your power to buy in different countries.
Watch as she uses the exchange rate in each country to work out how much she has to pay and how much she can afford.
Game - Converting time and money
Practise your converting money and time skills with these puzzles on our Divided Islands game.
Play the full Divided Islands game.
Test section
Question 1
The exchange rate for the US dollar is \(£1 = $1.41\).
Molly changes \(£75\) into dollars.
How many dollars does she receive?
Answer
\($105.75\)
Question 2
Oliver is going to Mexico for a holiday.
He has \(£250\) to change into Mexican Pesos ($).
How many Pesos will he receive?
\(£1 = 27.18\) Mexican Pesos ($).
Answer
\(6795\) Mexican Pesos ($).
Question 3
Jayden comes back from a shopping trip to Dublin with \(\euro 23\) in his wallet.
How may £’s is this if the exchange rate is \(£1 = \euro 1.15\).
Answer
\(£20\)
Question 4
Caitlin has a summer job in County Galway.
She earns \(\euro 9.50\) per hour and works for \(26\) hours.
Her employer tells her that \(\euro 1 = \pounds 0.89\).
How much has she earned in £s?
Answer
\(£219.83\)
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