Annie just came back from her holiday in Spain. She has EUR3,000 left in her wallet and would like to convert it to USD for her next holiday in USA. Anne met a US tourist who is heading to Europe. The tourist is willing to exchange Annie’s EUR3,000 for USD3,240. The money changer in the airport provided the following quotes to Anne:
USD 1 MYR 4.17
MYR 1 EUR 0.22
Should Annie accept the offer from US tourist or exchange the money with the money changer in the airport instead? Explain with calculation.
Us tourist
EUR 3,000 for USD 3,240
Per Dollar rate = 3,000/3, 240
= 0.9259
For 3,000 USD
Euros will be = 3,000*0.9259
= 2,777.70 Euros
At airport exchanger
Per Dollar rate to Euro
= USD 1 MYR * MYR 1 EUR
= 4.17*0.22
= 0.9174
For 3,000 USD, euros will be
= 3,000*0.9174
= 2,752.20
Therefore as Annie is receiving more Euros while exchanging it with the tourist therefore she should take that option. Difference will be = 2,777.70 - 2,752.20.
= 25.50
Therefore tourist option should be accepted.
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