Real-Life Math
A currency broker must have mathematical ability. "The math she
does is not complicated, but a trader often has to make quick decisions and
must be able to do basic calculations quickly," says trader Carolyn Rizzo.
Not
surprisingly, the math involved in this career centers around currency and
exchange rates. As a currency broker, you need to know how these things work.
An
exchange rate is the rate at which one country's currency may be exchanged
for that of another. Exchange rates have been governed in recent years by
supply and demand. The demand may come from importers and exporters, tourists,
the military, private investors or international corporations.
For
example, say an American importer is dealing with a Japanese exporter. The
American can arrange to have his bank pay for the goods he is receiving in
Japanese yen. Likewise, an American exporter may receive a check for dollars
from a Japanese bank.
If the total demand for yen in the money market
is greater than that for dollars, it could cause the value of yen to rise.
Now
here's the question:
You're a currency broker. Your client, who imports
furniture from Canada, calls you up. She has ordered a shipment of furniture
worth $10,000 Cdn from Canada.
This person is an American and her company
is in the U.S. However, she must pay for the furniture in Canadian dollars.
The
rate of exchange for purchasing Canadian dollars is $0.81 US
per Canadian dollar. How much will the bill for the furniture be in Canadian
funds?