You just came back from Canada, where the Canadian dollar was worth $.75. You st

Question

You just came back from Canada, where the Canadian dollar was worth $.75. You still have C$500 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for $.65. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $.20 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$500 for 1400 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.

Explanation / Answer

$ to be recieved = C$500x$0.65 = $325

Pesos to be recieved by exchanging $ = 325/0.20 = 1625pesos

Thus we can recieve 1625 pesos by converting C$ in $which is more than sellingC$ for 1400 pesos.

Therefore we should cash the canadian dollars.

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