Question

Carrie is an American teaching English in Mexico, and she currently has 45,000 pesos in her bank account. If the exchange rate changes from 1 U.S. dollar = 12.94 Mexican pesos to 1 U.S. dollar = 13.09 Mexican pesos, what happens to the value in U.S. dollars of the money in Carrie's bank account?

Answer 1

it decreases by 39.85

Answer 2

Because of change in conversion rates, the value in Carrie's account decreases by $39.85.

Explanation:

Total money in Carrie's bank account = 45000 pesos.

If exchange rate is 1 USD = 12.94 pesos, then in dollars the money in account is :

`(45000)/(12.94)` = $3477.588 ≈ $3477.59

If exchange rate is 1 USD = 13.09 pesos, then in dollars the money in account is :

`(45000)/(13.09)` = $3437.738 ≈ $3437.74

Now, if the conversion rate is 12.94 pesos then the amount in dollars is more, than when the conversion rate is 13.09 pesos.

The difference is
`3477.59-3437.74=39.85` dollars.

So, because of change in conversion rates, the value in Carrie's account decreases by $39.85.