Financial Mathematics: Currency Conversions

0 35
Avatar for mathematics.proofs
2 years ago

In this article I will be demonstrating how to get the formula which converts one type of currency into another and vice versa. It's a pretty simple task, so let me get started...

Let's say today 0.77 pounds is equal to 1 dollar. How would we be able to get 1 pound in terms of dollars?

Well, what we could do is name the currencies and also the value 0.77:

Currency 1 = C_1 = 1 Dollar

Currency 2 = C_2 = 1 Pound

Real Number = r = 0.77

So, I said that 0.77 pounds is equal to 1 dollar. Because of the definitions above, it can be written like this:

C_1 = r*C_2

If we want to make the opposite conversion, we do a simple manipulation of the formula above:

C_2 = (1/r)*C_1

In non-mathematical terms, that would mean that:

1 Pound = (1/0.77)*(1 Dollar)


1 Pound = 1.30 Dollars (to 2 decimal places)

See, I told you it was pretty simple. You can use the formulas listed here to convert any two currencies back and forth. Just name C_1 and C_2 and the multiplier (r).

$ 0.43
$ 0.43 from @TheRandomRewarder
Sponsors of mathematics.proofs
Avatar for mathematics.proofs
2 years ago