Question

4. A tourist tendered US$ 1,500 at a shop on the North Coast to pay for Jamaican memorabilia which cost $115,000. Given that the exchange rate is: Selling US$1 = J$127.65 and buying US$1 = J$121.32; (a) how much change in J$ should the tourist receive? (5 marks] (b) If GCT of 16.5% was charged on the goods, what would the total cost be? [2 marks] (c) If the tourist was using Canadian currency to pay the $115,000, at an exchange rate of: selling CAD$1 = J$120.90, buying CAD$1 = J$116.82, how much Canadian dollars would it costs? [3 marks]

Answer 1

a CALCULATION OF JS TO BE RECEIVED BY TOURIST Total Cost of Jamaican Memorabilla = J$115,000 Total US$ Paid = US$ 1,500 Total amount Received on conversion of US$ into J$ is =Total US$ received x Buying Rate of US$ (Working Note) =US$ 1,500 x J$ 121.32 per US$ =J$ 181,980 =J$ 181,980 Total change in J$ to be received by tourist =Total J$ received on Conversion - Cost in J$ =J$ 181,980 - J$ 115,000 =J$ 66,980 b Calculation of Total Cost if GTC of 16.5% is charged Particulars Amount Cost J$ 115,000 ADD: GCT @16.5% J$ 18,975 TOTAL COST J$ J$ 133,975 Rate of Conversion J$ 121.32 TOTAL COST in US$ US$ 1,104.311

(Working Note) C Cost of Jamaica Memorabilla in CAD $ = Cost in J$ / Buying Rate of CAD$ =J$ 115,000 / $ 116.82 per CAD$ =CAD$ 984.4205 WORKING NOTES Buying rate means the rate at which Money dealer is willing to buy the Foreign currency Selling rate means the rate at which Money dealer is willing to sell the Foreign Currency So, in short Buying rate for Money Dealer = Selling Rate for Tourist Selling rate for Money Dealer = Buying rate for Tourist In the present case Tourist has US$ So, he has to sell the US$ to money Dealer. It means money dealer has to buy the US$ from the tourist. So, the relevant rate for the conversion here is BUYING RATE

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