Need help on math QUESTION!!!
November 13, 2008 12:58pm CST
ok here it goes cause i cant seem to figure it out. Mr. Travel ia arranging package deals to florida.The current exchange rate is $1.5021 Cdn per US dollar. Financial experts predict that in three months the rate will drop to $1.4901. a) how much will a traveller save on $6000 Cdn by waiting for three months? b) how much will a traveller save on $10 250.00 Cdn by waiting three months? please show supportive answers if you can figure this out THANX a bunch!
13 Nov 08
I think I can answers this. Let me try. First I assume that Mr. Travel pays the bill on today according to the today exchange rate. So he will get loss by this dealing. Because the future value of this money (for example 10000 CDN) after three months is 10225. I consider that interest is 9% per annum. If he pays the same amount on the date of journey, then he has to pay 9920 CDN only according to the rate of exchange on that date. But actually some will benefited by these exchange rates only. Let me consider another example. Today exchange rate is 2 and after three months is 2.1 If the person pays on today, he need to pay 10000 CDN. The future value of this money is same as above 10225. Now if he pays on journey date, then he has to pay 10500 CDN. It means he saved 275 CDN in three months if the exchange rate is as said above.
13 Nov 08
When you convert that future money to present money, then For the exchange rate you said He has paid 10000 CDN today But the value if we calculated from future is 9701 CDN. Which means he lost almost 300 CDN by this deal. For the exchange rate as I said, He has paid 10000 CDN today, But the value if we calculated from future is 10268 CDN. Which means he got profit of almost 268 CDN by this deal.