Global Sourcing

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Currency Exchange

WHAT IS
- An exchange rate is the value of a IT??
nation's currency in terms of the currency of
another nation or economic zone.

- An exchange rate is how much of your country's currency buys another foreign
currency. ·

- A currency exchange is a business that has the legal right to exchange one
currency for another to its customers
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Currency Exchange

WHAT IMPACTS
- Differentials in Inflation IT??
- Differentials in Interest Rates
- Public Debt
- Terms of trade

- Strong Economic Performance

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Currency Exchange

How to compute?
To Multiply or Divide……that is the question

- Let’s convert 4,000,000 Euros to US Dollars assuming the exchange rate of

$1.42/Euro. (This exchange rate means that it costs $1.42 American dollars to buy 1
Euro)
4,000,000 € x $1.42
€

4,000,000 * $1.42 = $5,680,000

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Currency Exchange

How to compute?
To Multiply or Divide……that is the question

- Let’s convert 100,000 Yen to US Dollars assuming the exchange rate of

82Yen/Dollar (This exchange rate means that it costs $1 American dollar to buy 82 Yen
or conversely, 82 Yen to buy 1 American Dollar)
100,000 ¥ x $1
82 ¥

100,000 Yen/82 = $1,219.51

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Currency Exchange

Additional Problems

- Assuming 1 British Pound is equal to 1.17 Euros; how many Euros is 50 British
Pounds worth?

50 £ * 1.17 €
1£

50 * 1.17 = 58.5 €
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Currency Exchange

Additional Problems

- Assuming 1 British Pound is equal to 1.17 Euros; how many British Pounds is 15
Euros worth?

15 € * 1£
1.17 €

15/1.17 = 12.82 £
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Take Home Problems

Currency What Can Be Purchased
US$ Cdn$ Yen British Pound Euro Indian Rupee
US$ 1 1.29 104 0.74 0.82 73.8
Cdn$ 0.78 1 80 0.58 0.64 58
Yen 0.0097 0.012 1 0.0072 0.0079 0.71
British Pound 1.35 1.73 139.81 1 1.11 99.6
Euro 1.22 1.57 126.3 0.9 1 90.01
Indian Rupee 0.014 0.017 1.4 0.01 0.011 1

Question #1 If Mary, a Canadian, is planning on spending a week in Germany

and she discovers that hotel stays are 65 euros a night and meals are
estimated to be 120 euros a day plus a gratuity of 15%, how much money, in
Canadian Dollars, will she require?
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Take Home Problems

Question #2 A Miami Florida company is looking to purchase iron ore in either
Sept-iles Quebec or in Baltimore Md. The iron ore in Sept-iles is priced at $32
Canadian dollars per tonne. In Baltimore MD it is $27 American Dollars. The
total transportation costs for the Canadian Coal is $3.50 a tonne while in the
US it is only $1.25. Which vendor should the Miami group use and how much
savings is there in American dollars, between the two options assuming they’re
looking to buy 60,000 tonnes?
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Take Home Problems

Question #3 Blake is going on holiday to Florida. He converts £480 to US
dollars. How many dollars will he receive?
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Take Home Problems

Question #4 The Port of Long Beach California charges vessels for wharfage
fees for the time they are loading/discharging or both. The length of the vessel
determines the daily charge. A ship 200 meters long pays $2,882 dollars a
day. If the 200 meter ship comes from China, what will be its daily rate in Yen?
And if it were a Spanish vessel? What would be the cost in their currency?
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Take Home Problems

Question #5 While in Manchester England Tony Hatcher purchased a
cardigan sweater for 142 £. When he arrived home in Nova Scotia he noticed
a local vendor had the same sweater on sale for $199. Was Tony upset about
this? Why or why not?