The arithmetic of the exchange is very simple and requires only a knowledge of multiplication and divi sion as the following rules show : 12. Conversion for fixed exchange.— ( Conversion with cent quotations).
(A). Amount in foreign currency = Amount in dollars Rate in cents.
(B). Amount in dollars = Amount in foreign cur rency X Rate in cents. Buy low, sell high, the lower the rate the more foreign money you receive for a dollar.
To convert dollars into foreign currency we have the following rule: divide the amount in dollars by the rate in cents per foreign unit.
How many kronen can be bought for $900 at 26.46 cents per krone? 900 26.46 = 3,401.36 kronen. Answer.
To convert foreign currency into dollars, we may state the rule: multiply the amount in foreign cur reney by the rate in cents per foreign unit.
Examples: How much will drafts for the following amounts cost? 5,181.35 francs at 19.30 cents? 5,181.35 X 19.3 , $1,000.
4,166.67 marks at 24 cents? 4,166.67 X 24 = $1,000. 4,166.67 marks at 96 cents for four marks? 4,166.67 X 96 X = $1,000.
3,401.26 kronen at 26.46? 3,401.26X 26.46 = $900.
13. Conversion for 'movable exchange.— (Conver sion with franc quotations).
Amount in francs = Amount in dollars X Rate in francs.
Amount in dollars = Amount in francs = Rate in francs. Buy high, sell low, the higher the rate the more francs you receive for a dollar.
To convert dollars into francs, the rule is: multiply amount in dollars by the rate in francs.
How many francs can be bought for $1,000 when the rate is per dollar? 5.18125 X 1,000 = 5,181.25 francs.
To convert francs into dollars, the rule is: divide the amount in francs by the rate in francs.
What is the value of a draft on Paris for 5,181.25 francs when the rate is francs per dollar? 5,181.25 = $1,000 5.18125 Any fractional quotation is applied on the dollar value only. If the above rate had been 5.18% + %4, the answer would be $1,000.15 or $1,000 + % of 1%.
We have not dealt fully with the fractional quo tations of the franc, mark and florin, because as a rule, these are only encountered in large transactions.
They are explained in Chapters XV, XVI and XVII 14. Simple arithmetic exchange is considered in its true nature, as a commodity, foreign exchange arithmetic will assume a form elementary in its simplicity, as the following examples show: Fixed exchange.— How many articles at 20 cents each can be purchased with $100? 100 ÷ .20 = 500 articles.
How much will 500 articles cost at 20 cents each? 500 X .20 = $100 Movable exchange.— If one dollar will buy five articles, how many will $100 buy? 5 X 100 = 500 articles What is the value of 500 articles when one dollar will buy 5? 500 ÷ 5 = $100 In dealing with commodities any commission or percentage on the price is reckoned on the total dollar value. In buying and selling exchanges, the same rule is followed ; fractional quotations apply only to the dollar value.
15. Exchange tables.—Ptxchange tables like inter est tables, are most convenient and useful tools, and tho formidable in appearance with their serried col umns of figures, they are simple in operation and their compilation is merely a matter of multiplication.
All exchange tables give the same information tho some give it in greater detail than others—the number of foreign units for so many dollars and the number of dollars for so many foreign units, at various rates. As an example, we will compile a brief franc table for the rate 5.16%. This, of course, represents the value of a dollar in francs and we must now find the value of 1 franc by division, • = .1934704. We are now ready to compile our table as follows: By continued multiplication of the top lines, this table can be extended indefinitely, but the above is sufficient to find the equivalent of any sum up to 1,000,000 francs or dollars.
890 francs at 5.16% is found as follows:' 800 francs = $154.78 90 francs = 17.41 $172.19 Our next table would be at the rate of 5.17% (or .1932367), or if we desire a closer quotation, (.1934401), and so on for every quotation that is likely to be required.