- Converting money is basically changing the value of money from one currency to another. Click through to learn more.
[Please watch the video attached at the end of this blog for a visual explanation of money conversions]
While this is quite a short lesson, this will definitely be a lesson that you rely on later in life, or perhaps even now. With how fast the world is moving, and how certain countries have even opted to adopt a common currency, knowing how to convert money from one currency to another is an extremely important topic.
What is money?
This might seem like a simple question with an obvious answer. As per the Oxford Dictionary, money is a “current medium of exchange in the form of coins and banknotes; coins and banknotes collectively”.
So why exactly is it important to know what money means? That’s because of exchange rates!
What is an exchange rate?
An exchange rate is considered to be the value of one currency for the purpose of converting it to another. Basically, not all currencies have the same value, and you might have heard of different types of currencies either online or if you have had the opportunity to go abroad.
If we consider a few examples, most European countries use the Euro (€)
The United Kingdom uses Sterling Pounds (£)
America uses American Dollars ($) whereas Australia used Australian Dollars ($)
All these currencies do not have the same value, some currencies are actually a bit stronger or a bit more expensive than others.
We actually have a method of converting one type of currency to another, and this method is using exchange rates! So, you could say that exchange rates allow us to change one currency to another.
If you look at the example question given below, the amount of money that Jane has is in pounds (£), and we are given the exchange rate which is £1 = € 1.62.
To solve this problem, and find out how much £225 is worth in Euros, we must multiply the left-hand side by 225.
225 ✖ £1 = € 1.62 ✖ ?
In order to find out how many Euros this is equivalent to, we must do the same thing on the right-hand side, and therefore we must multiply 1.62 by 225, which then results in € 364.5.
To make things simpler, you could also try cross multiplication as shown below:
£1 = € 1.62
£225 = ?
? = ( £225 ✖ € 1.62 ) ÷ £1
? = € 364.5
In the next example shown below, we have Ahmed who wants to change 2000 Saudi Riyals into Euros.
We can see that € 1 = 5.087 Saudi Riyal.
We can once again rely on the exchange rate to get the answer.
It can be seen that the amount of money that Ahmed has is actually given in terms of Saudi Riyal, so what we can do is we can change the exchange rate the other way around.
Currently, the exchange rate is € 1 = 5.087 Saudi Riyal, but if we want to, we can divide the exchange rate by 5.087 into both sides, which then tells us how many Euros is equal to one Saudi Riyal.
Then we can multiply that value by 2000 to get the number of Euros, which is € 393.16.
If you don’t want to change the exchange rate to find out how much one Saudi Riyal is in terms of Euros, you can also simply divide 2000 by 5.087, but rather than multiplying by the exchange rate like we did in the previous example, you can divide by the exchange rate here and that also will give you the same answer in Euros.
Helpful points for practicing money conversions for your upcoming Cambridge IGCSE Mathematics exams.
Mathematics is a subject that relies heavily on how well you prepare in advance for your exams. To make things easier, here are a few pointers that may help you get ready for your upcoming Cambridge IGCSE Mathematics exams.
Pay close attention to the exchange rate given in the paper, and be careful to place decimal points where necessary.
Practice sample questions – Money Conversions questions have a chance of appearing in your paper. Our question banks have questions of different difficulty levels that you can practice before your actual exams.
Practice past paper questions to familiarise yourself with the format of the questions and paper.
Ask for help – You are never too late to ask for assistance if you’re struggling. Reach out to us at Tutopiya to find the right tutor to help you pass your exams with flying colors!
Watch the video below for a visual explanation of money conversions and attempt the quiz to challenge yourself!
