Money is a term used to describe the means of exchange used to pay for goods and services, such as coins, notes, demand deposits, and so on. Money is used to pay for the worth or price of an item or service. Currency refers to the paper and coin forms of money. We are going to discuss how Conversion of Money takes place.

Different countries have different currencies, such as Rupees in India, Dollars in the United States, Euros in some European countries, Pounds in the United Kingdom, and so on. The value of various currencies varies. The value of a currency is determined by a number of economic factors, including exports, imports, inflation, employment, growth rates, interest rates, and so on.

We will study about money concepts, currencies and currency denominations in this post. We’ll also learn how to convert currencies, how to educate a child to count money and the distinction between money and currency. Continue reading to know more.

What is Money?

Money is needed to buy food, toys, candy, go to the movies, shop, pay, and rent a house. We can buy anything exchanging money. This means money is a medium of exchange that people use to buy goods and services and pay people for their work as wages.

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The currency is money in the form of coins and paper, and different countries may have different currencies. The rupee is the unit of Indian currency with the symbol \(₹\).
The currency of the United States of America is Dollar. Every country may have a unique currency.

What is Currency?

A currency is the note and coin form of money used in a country. We can define currency as a system of money in everyday use for the people of a nation. Money is used in any form as an exchange medium, specifically circulating coins and banknotes. Each country has its currency. Different types of currencies are used in various countries. Indian rupee \((₹)\) Euros \((€)\), Japanese Yen \((¥)\), US dollars \((\rm{US}$)\), and Pounds Sterling \((£)\) are some examples of currencies.

Coins and Notes

Any small piece of metal that looks flat, round, and approved by a government is known as a coin. It is also used as a medium of exchanging money. They may contain some numerals, integers, or text on their surface. They are standardized in weight and are produced in large quantities.

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The Government delivers coins and currency notes. Given below are some examples of coins and bills used in the USA.
Coins: Penny, Nickel, Dime, Quarter, Half Dollar.

Bills: \($1\) Bill, \($2\) Bill, \($5\) Bill, \($10\) Bill, \($20\) Bill, \($50\) Bill, \($100\) Bill.

In India, the coins and the notes that are used nowadays are given below,

We can convert rupees into paise and paise into rupees using the following formulas.
\(1\) rupee \(=\) \(100\) paise
\(100\) paise \(= 1\) rupee \(1\) paise \(=\,\frac{1}{100}\) rupees
The Dollars are used in the United States. The image of one Dollar is given below.

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In European countries such as France, Germany, Greece, etc., the currency used is Euro. The image of Euros is given below.

Conversion of Money

Let us imagine your family is travelling to another country, or you are purchasing something from any online commercial platform from another country. We can observe that the given price is in a different currency, which is not used in our country. In such a case, we want to calculate how much the item costs in our national currency to decide whether to buy the desired item or not.
Let us take an example: Suppose you want to buy a doll from any online site in the US. The cost of the doll is \(\rm{US}$10\). How much does the doll cost in rupees? To find the doll’s value in rupees, we need to know the conversion value of dollars to rupees. The following table shows you various currencies’ values compared to a US Dollar (USD) as of July \(6,\) \(2021.\)

Currency Name	Value some Currencies in Dollars
US Dollar	\(1.00\,\rm{USD}\)
Euro	\(1.18793\,\rm{USD}\)
British Pound	\(1.38852\,\rm{USD}\)
Indian Rupee	\(0.01345\,\rm{USD}\)
Australian Dollar	\(0.75684\,\rm{USD}\)
Japanese Yen	\(0.0090\,\rm{USD}\)

From the table, we can say,
\(1.18793\,\rm{USD}\) equals \(1\) Euro then, \(1\,\rm{USD}\) equals \(\frac{1}{{1.18793}} = 0.841\) Euro(approx)
\(1.38852\,\rm{USD}\) equals \(1\) British Pound then, \(1\,\rm{USD}\) equals \(\frac{1}{{1.38852}} = 0.720\) Pound(approx).
\(0.01345\,\rm{USD}\) equals \(1\) Indian Rupee then, \(1\,\rm{USD}\) equals \(\frac{1}{{0.01345}} = 74.34\) Rupees (approx)
\(0.75684\,\rm{USD}\) equals \(1\) Australian Dollar then, \(1\,\rm{USD}\) equals \(\frac{1}{{0.75684}} = 1.32\) Australian Dollar (approx).
\(0.0090\,\rm{USD}\) equals \(1\) Yen then, \(1\,\rm{USD}\) equals \(\frac{1}{{0.0090}} = 111.11\) Yen (approx).

Exchange Rate

The rate at which the market transforms one currency into another is known as the exchange rate. The foreign exchange determines the exchange rate. It tells you how much your currency is valuable in a foreign currency. So, it means that how much of your country’s currency can buy another country’s currency.
For instance, how many Indian rupees take to buy one US Dollar? On \(6^\rm{th}\) July \(2021\), the exchange rate is \(74.34\), which means it takes \(₹74.34\) to buy \(\rm{US}$1\).
The exchange rate is not constant. It can vary day to day on a real-time basis. For some countries, exchange rates frequently change, while others use a constant exchange rate.

Solved Examples – Conversion of Money

Q.1. Madhu has \(15\) dollars in his pocket, and he spent \(5\) dollars for buying toys. Now, find the left amount in his pocket in Australian Dollars?
Ans: Madhu has \(15\) dollars in total, and he spent \(5\) dollars.
The amount left in his pocket \(= $15 – $5 = $10\)
Hence, the amount left in Madhu’s pocket is \($5\).
We know that as per the exchange rate of July \(6,\)
\(1\) USD equals \(= 1.32\) Australian Dollar (approx).
Hence, \(5\,\rm{USD} = 1.32 × 5 = 6.6\) Australian Dollar

Q.2. Rima wants to buy a football from the United States from an online e-Commerce site from India. The cost of football is \($20\). How much did she pay for the football in Indian Rupees?
Ans: The cost of a football is \($20\) in the United States.
As per the exchange rate of July \(6,\) we know that \($1\) is equal to \(₹74.34\).
So, the value of \($20\) is equal to \(20 × ₹ 74.34 = ₹ 1486.8\).
Therefore, the amount in Indian rupees she has to pay for the football is \(₹ 1486.8\).

Q.3. Convert \(5\) pound into Yen.
Ans: Yen is Japanese currency.
As per the exchange rate of July \(6,\) \(1\) Pound is equal to \(153.98\) Yen.
Hence, \(5\) Pound is equal to \(153.98 × 5 = 769.9\) Yen

Q.4. Convert \(2\) Euro into Indian Rupees.
Ans: As per the exchange rate of July \(6,\) \(1.18793\,\rm{USD}\) equals \(1\) Euro.
Then, \(2\) Euro \(= 1.18793\,\rm{USD} × 2 = 2.37\,\rm{USD}\)
\(1\,\rm{USD}\) equals \(= ₹74.34\) (approx)
Hence, \(2.37\,\rm{USD} = ₹74.34 × 2.41 = ₹179\) (approx).

Q.5. Convert \(₹140\) into US dollars.
Ans: As per the exchange rate of July \(6,\) \(1\) Indian Rupee \(= 0.01345\,\rm{USD}\)
Hence, \(₹ 140 = 0.01345 × 140 = 1.883\,\rm{USD}\)

Summary

This article discussed converting money and currencies and converting one nation’s currency to another nation’s currency. We discussed that each country has its currency, and various currencies are used in different countries. Euros \((€)\), Japanese Yen \((¥)\), US dollars \((\rm{US}$)\), and Pounds Sterling \((£)\) are examples of currencies.

Frequently Asked Questions

We have provided some frequently asked questions about conversion of money here:

Q.1. What are standard currency conversions in India?
Ans: Standard currency conversion depends on the foreign exchange. The Government and the reserve bank decide it. Currency value depends on a few factors that influence the economy: exports, imports, inflation, employment, growth rates, interest rate, etc.

Q.2. Convert (₹100) in (\rm{US}$), (\rm{UK}£) and European (€).
Ans: As per the exchange rate of July \(6,\)
\(1.18793\,{\text{USD}}\) equals \(1\) Euro then, \(1\,{\text{USD}}\) equals \(\frac{1}{{1.18793}} = 0.841\) Euro(approx)
\(1.38852\,{\text{USD}}\) equals \(1\) British Pound then, \(1\,{\text{USD}}\) equals \(\frac{1}{{1.38852}} = 0720\) Pound(approx)
\(1.0.1345\,{\text{USD}}\) equals \(1\) Indian Rupee then, \(1\,{\text{USD}}\) equals \(\frac{1}{{0.01345}} = 74.34\) Rupees (approx)
We know that \(1\) Indian Rupee \(0.01345\,{\text{USD}}\)
Hence, \(100\) Rupees \( = 0.01345 \times 100 = 1.345\,{\text{USD}}\)
We know that (1.18793\,\rm{USD}) equals (1) Euro.
Thus, \(1.345\,{\text{USD}} = \frac{{1 \times 1.345}}{{1.18793}} = 1.16\,{\text{UK}}\,£\) (approx)
\(1\,{\text{USD}}\) equals \(\frac{1}{{1.38852}} = 0.72\) Pound(approx)
Thus, \(1.345\,{\text{USD}} = 0.72 \times 1.345 = 0.97684\,€\)

Q.3. What do you mean by conversion of money?
Ans: Conversion of money is the knowledge of the real value of one currency to be transformed into another country’s currency so that you can convert between the two currencies.

Q.4. Why conversion of money can be important?
Ans: If someone wants to purchase something from any online commercial platform from another country, he will observe that the given price of the things is in a different currency. To calculate how much he will pay in his nation’s currency to buy something with another nation’s currency, conversion of money is important.

Q.5. What is meant by currency exchange rate?
Ans: The rate at which the market transforms one currency into another is known as the exchange rate. It tells how much your currency is valuable in a foreign currency. So, it actually means that how much of your country’s currency can buy another country’s currency.
For instance, how many Indian rupees take to buy one US Dollar? On \(6^\rm{th}\) July \(2021\), the exchange rate is \(74.34\), which means it takes \(₹74.34\) to buy \(\rm{US}$1\).
The exchange rate is not constant. It can vary day to day on a real-time basis. For some countries, exchange rates frequently change, while others use a constant exchange rate.

We hope this detailed article on conversion of money helped you. If you have any doubts or queries regarding this topic, feel to ask us in the comment section, and we will be more than happy to assist you. Happy learning!