Grade by Grade
F. Financial Literacy · Money and Finances: Exchange Rates, Budgets, Financial Decisions and Interest

Exchange Rates: Comparing Currencies

F1.1 A1About 40 minutes
Learning goals
  • I can explain what an exchange rate is.
  • I can compare exchange rates to tell which currency is worth more Canadian dollars.
  • I can convert an amount in a foreign currency to Canadian dollars.
  • I can compare prices given in different currencies.

Words to know

currency
The kind of money a country uses, like the Canadian dollar or the Mexican peso.
foreign currency
Money from another country.
exchange rate
How much of one currency you get for one unit of another currency, like 1 USD = 1.40 CAD.
convert
To change an amount from one currency to another using the exchange rate.
currency code
A three-letter short form for a currency: CAD (Canadian dollar), USD (US dollar), EUR (euro).
stronger / weaker
A currency gets stronger when each unit can buy more of another currency, and weaker when it buys less.

Remember from Grade 6

In Grade 6 you compared ways to pay and found the real cost of a purchase after adding 13% HST, fees and interest. You also worked a lot with decimals and rates, like $2.50 per kilogram.

In Grade 7 you'll use those skills with money from other countries.

A trip to see family

Nadia's family is driving from Windsor to visit her aunt in Michigan, in the United States. At a store there, Nadia finds a hoodie with a price tag of $20. She has Canadian money. She wonders, "Is that $20 the same as my $20?"

No, it isn't! The store's $20 means 20 US dollars. A US dollar and a Canadian dollar are different currencies, and they are not worth the same amount. To know what the hoodie really costs her, Nadia needs the exchange rate.

What is a currency?

A currency is the money a country uses. Canada uses the Canadian dollar (our $1 coin is nicknamed the loonie). Each currency has a three-letter code:

  • CAD: Canadian dollar
  • USD: US dollar
  • EUR: euro (used by many countries in Europe)
  • GBP: British pound
  • MXN: Mexican peso

Some currencies share a name. Canada and the United States both use "dollars", so the code tells you which one you mean.

What is an exchange rate?

An exchange rate tells you how much one currency is worth in another currency. It's a rate, just like "$3 per kilogram".

1 USD = 1.40 CAD means one US dollar is worth $1.40 in Canadian money. So every US dollar costs you $1.40 Canadian.

Exchange rates change every day. Things happening in the world, like trade between countries, change them a little bit at a time. In this unit we use example rates so the numbers are easy to work with. When you need a real rate, look it up the same day (the Bank of Canada posts exchange rates on its website).

CurrencyCodeUsed in (examples)Example rate in Canadian dollars
US dollarUSDUnited States1 USD = 1.40 CAD
euroEURmany European countries, such as France, Germany and Italy1 EUR = 1.50 CAD
British poundGBPUnited Kingdom1 GBP = 1.80 CAD
Mexican pesoMXNMexico1 MXN = 0.08 CAD
Example exchange rates used in this unit. Real rates change every day, so always look up today's rate.

Comparing exchange rates

When every rate is written as 1 unit = ___ CAD, you can compare them easily. The bigger the number of Canadian dollars, the more one unit of that currency is worth.

  • 1 GBP = 1.80 CAD, so one pound is worth the most in this table.
  • 1 EUR = 1.50 CAD, a bit more than 1 USD = 1.40 CAD.
  • 1 MXN = 0.08 CAD, so one peso is worth 8 cents Canadian. That doesn't mean Mexico is "cheaper" overall. Prices there are written with bigger numbers of pesos.

Order from most to least Canadian dollars per unit: GBP, EUR, USD, MXN.

$0.00$0.50$1.00$1.50$2.001.80GBP1.50EUR1.40USD0.08MXN$1 CAD (one loonie)Canadian dollars for 1 unit (example rates)
Each bar shows how many Canadian dollars one unit is worth. Bars above the dashed $1 line are worth more than a loonie; one peso is worth only 8 cents.

Converting a foreign currency to Canadian dollars

To find what something costs in Canadian dollars, multiply the foreign amount by the rate.

Foreign amount × (CAD per unit) = amount in CAD

It's just like buying apples: 5 kg at $3 per kilogram costs 5 × 3 = $15. Here, 20 USD at $1.40 per US dollar costs 20 × 1.40 = $28 CAD.

1 USD1.40 CAD× 1.40 (to CAD)÷ 1.40 (to USD)Example rate only
With the example rate 1 USD = 1.40 CAD: multiply by 1.40 to go from US dollars to Canadian dollars, and divide by 1.40 to go back.
Worked example

Example 1: Nadia's hoodie

The hoodie costs 20 USD. The rate is 1 USD = 1.40 CAD. What does it cost in Canadian dollars?

  1. Each US dollar is worth $1.40 CAD, so multiply: 20 × 1.40.
  2. 20 × 1.40 = 20 × 1 + 20 × 0.40 = 20 + 8 = 28.
  3. Check: the answer in CAD should be a bigger number than 20, because each US dollar is worth more than one Canadian dollar. 28 > 20 ✓

The hoodie costs about 28.00 CAD (before any tax).

Worked example

Example 2: Which ticket costs the least?

Three museums sell student tickets. Which is cheapest in Canadian dollars?

  • Paris: 15 EUR
  • New York: 18 USD
  • Mexico City: 300 MXN
  1. Paris: 15 × 1.50 = 22.50 CAD.
  2. New York: 18 × 1.40 = 25.20 CAD.
  3. Mexico City: 300 × 0.08 = 24.00 CAD.
  4. Compare in the same currency: 22.50 < 24.00 < 25.20.

The Paris ticket (15 EUR = 22.50 CAD) is cheapest. Notice that 300 looks huge, but 300 pesos is only $24 CAD. You can't compare prices until they're in the same currency.

Worked example

Example 3: When the rate changes

Last month the rate was 1 USD = 1.35 CAD. Today it is 1 USD = 1.40 CAD. A jacket costs 50 USD. How much more does it cost today in Canadian dollars?

  1. Last month: 50 × 1.35 = 67.50 CAD.
  2. Today: 50 × 1.40 = 70.00 CAD.
  3. Difference: 70.00 − 67.50 = 2.50 CAD.
  4. Today you need more Canadian dollars to buy each US dollar. We say the Canadian dollar got weaker compared to the US dollar.

The jacket costs $2.50 CAD more today. When the Canadian dollar gets weaker, things priced in other currencies cost Canadians more.

Worked example

Example 4: Turning a rate around

If 1 USD = 1.40 CAD, how many US dollars is 1 Canadian dollar worth?

  1. The rate says 1.40 CAD = 1 USD.
  2. To find what 1 CAD is worth, divide both sides by 1.40: 1 CAD = 1 ÷ 1.40 USD.
  3. 1 ÷ 1.40 = 0.714... ≈ 0.71.

1 CAD ≈ 0.71 USD. A loonie is worth about 71 US cents with this example rate.

Does my answer make sense?

  • If one unit of the foreign currency is worth more than $1 CAD (like USD, EUR, GBP), the CAD amount should be a bigger number.
  • If one unit is worth less than $1 CAD (like MXN), the CAD amount should be a smaller number.
  • Round money answers to the nearest cent (two decimal places).

Stay calm with decimals

Rates like 1.40 or 0.08 can look scary. Break them apart: 1.40 = 1 + 0.40, and 0.08 is 8 hundredths. Multiplying 300 × 0.08 is the same as 300 × 8 = 2400, then divide by 100 = 24. Take a breath, estimate first, and then calculate.

Just for fun

Canada's $1 coin is called the loonie because of the loon on it. So when the $2 coin arrived in 1996, what else could Canadians call it but the toonie?

Hands-on activity

Currency detective

You need: paper, a pencil, a calculator and, with a grown-up, a website that shows today's exchange rates (for example, the Bank of Canada) or a bank's exchange rate board.

  1. Make a table with columns: Currency, Code, Today's rate in CAD.
  2. Look up today's rate for USD, EUR, GBP and MXN. Write each one as "1 ___ = ___ CAD".
  3. Compare today's rates with this lesson's example rates. Which currencies are worth more today than the example? Which are worth less?
  4. Choose something you'd like to buy, like a book, a game or a ticket. Imagine it costs 25 units in each currency. Convert each one to CAD.
  5. Bonus: check the rate again in one week. Did it change? By how much?

What to look for: rates written the same way (1 unit = ___ CAD), correct multiplication, answers rounded to the cent and a sensible order from most to least valuable.

Your turn

1

Use 1 USD = 1.40 CAD. Convert 10 USD to Canadian dollars.

2

Use 1 EUR = 1.50 CAD. Convert 40 EUR to Canadian dollars.

3

Use 1 MXN = 0.08 CAD. Convert 500 MXN to Canadian dollars.

4

Use 1 GBP = 1.80 CAD. Convert 25 GBP to Canadian dollars.

5

Which is worth more: 1 euro or 1 US dollar? Use the example rates.

6

A snack costs 3.50 USD. What is that in Canadian dollars?

7

A book costs 12 GBP in London or 15 USD in Boston. Which costs less in Canadian dollars, and by how much?

More practice: warm-up

1

Convert 2 USD to CAD (1 USD = 1.40 CAD).

2

Convert 100 MXN to CAD (1 MXN = 0.08 CAD).

3

Convert 10 EUR to CAD (1 EUR = 1.50 CAD).

4

What is the code for the Canadian dollar?

5

What does 1 GBP = 1.80 CAD mean?

More practice: on your own

1

Convert 35.50 USD to CAD.

2

A hotel in Rome costs 120 EUR per night. How much is 3 nights in Canadian dollars?

3

The rate changes from 1 USD = 1.40 CAD to 1 USD = 1.30 CAD. Did the Canadian dollar get stronger or weaker? How much less would an 80 USD jacket cost?

4

Put these in order from most to least valuable per unit: MXN, EUR, CAD, GBP, USD.

5

A family taco dinner in Mexico costs 450 MXN. A pizza dinner in the US costs 30 USD. Which costs less in CAD?

Challenge

1

A video game costs 59.99 USD in the US or 79.99 CAD in Canada. Which is cheaper, before tax and shipping? By how much?

2

Using 1 EUR = 1.50 CAD and 1 USD = 1.40 CAD, about how many US dollars is 1 euro worth?

3

Leo says, "300 pesos is way more money than 25 euros, because 300 is bigger than 25." Is he right? Explain using the example rates.

Check your understanding

Quiz

1.

What does 1 USD = 1.40 CAD mean?

2.

With 1 EUR = 1.50 CAD, what is 30 EUR in Canadian dollars?

3.

Which is worth the most Canadian dollars? Use the example rates.

4.

With 1 MXN = 0.08 CAD, what is 1000 MXN in Canadian dollars?

5.

The rate changes from 1 USD = 1.40 CAD to 1 USD = 1.50 CAD. What happened?

6.

A cap costs 15 USD in Buffalo and 20 CAD in Toronto. Which costs less in CAD? (1 USD = 1.40 CAD)

For parents and teachers

Big idea: Ontario's Grade 7 math curriculum (F1.1) asks students to identify and compare exchange rates and convert foreign currencies to Canadian dollars and vice versa. This first lesson focuses on understanding rates and converting to Canadian dollars by multiplying. The next lesson converts from Canadian dollars by dividing.

Common difficulties:

  • Comparing raw numbers across currencies ("300 pesos is more than 25 euros"). Always convert to one currency first.
  • Multiplying when they should divide, or the reverse. Ask, "Should the CAD number be bigger or smaller?"
  • Decimal multiplication, like 35.50 × 1.40. Encourage splitting (35.50 × 1 + 35.50 × 0.40) or a calculator, after an estimate.
  • "Stronger" and "weaker": a stronger Canadian dollar means you need fewer CAD to buy each foreign unit.

How to help: Look up a real exchange rate together and talk about prices you see online in US dollars. All rates in this lesson are examples; real rates change daily. This lesson also builds A1 skills: estimating to check if an answer is reasonable and staying calm when numbers look complicated.