CURRENCIES

1. CURRENCIES What’s in your wallet? How many currencies are in use around the world? 178

2. Has anyone traveled out of the country? • You may have had to convert dollars into a foreign currency and/or convert the foreign currency back into dollars. • Does anybody know how to convert currency? • Currency conversion is similar to translating a foreign language, but in the case of currencies we use math. • Does anybody know any other reasons why currency is important to financial planning? • The value of a countries currency can seriously affect the level of economic activity in the country.

3. 1 US Dollar = 0.7806 Euros • Which currency is stronger? • Euro • How many dollars does it take to purchase 1 euro? • If we know that 1 US Dollar = 0.7806 Euros we can calculate the inverse by dividing 1 US Dollar by the equivalent 0.7806 Euros. 0.7806 / 1 = $1.281 • This means that it takes $1.281 US Dollars to purchase 1 Euro • How much would $20 be in Euros? • $20 (.7806) = 15.61 Euros • How much would 20 Euros be in Dollars? • 20 Euros (1.281) = $25.62 Dollars

4. Your turn!!! 1.00 ARS = 0.253100 USD • Which currency is stronger? • U.S. Dollar • How many Argentinean Pesos does it take to purchase 1 US Dollar? • If we know that 1 Argentinean Peso = 0.2531 US Dollars we can calculate the inverse by dividing 1 Argentinean Peso by the equivalent 0.2531 US Dollars. 0.2531 / 1 = 3.951 Argentinean Pesos • This means that it takes 3. 95 Argentinean Pesos to purchase 1 US Dollar • How much would $20 be in ARS Pesos? • $20 (3.951) = 79.02 ARS Pesos • How much would 20 ARS Pesos be in Dollars? • 20 ARS Pesos(.2531) = $5.06 US Dollars

5. PROS for a WEAK US Dollar CONS AGAINST a WEAK US DOLLAR Expensive for U.S. businesses to import goods. Price increase gets passed to consumer = HIGHER PRICES More expensive to travel and study abroad. Less foreign investment in U.S. Treasury’s. • It is cheaper for other countries to purchase U.S. goods. • More demand for U.S. goods = increased demand = more people needed to meet demand = more people employed!!! • Export more than you import, the trade deficit decreases. • Farmers benefit from comparatively cheaper products. • Weak dollar attracts foreign investment = stronger real estate and business investment.

6. PROS for a STRONG US Dollar CONS AGAINST a STRONG US DOLLAR Foreign businesses are less likely to import from the U.S.. Our goods are more expensive relative to other countries. U.S. companies sales drop because of reduced exports U.S. Farmers are hurt because goods are cheaper in other countries. U.S. Trade deficit increases because we are importing more than exporting • Cheaper to import goods into the US. Dollar buys more abroad • Cheaper for the U.S. citizen to travel abroad

7. Understanding U.S. Currency

8. Reflection Questions • What is U.S. currency? • All cash and liabilities owed to other countries • Who owns the most currency? • The individual citizens around the country and world • What type of market is the currency market? • Auction Market • The U.S. represents what percentage of global growth? • 1/3 of global growth • Why do people want to own dollars? • Not considered to be politically volatile • Easier to handle and liquidate than gold • Considered to be a safe store of value • Why do people around the world have to own different currencies? • Safety and diversification • Settle payments

9. Final Comprehension Question!!! • Explain the following: Recently, the Federal Reserve Chairman Ben Bernanke made comments eluding to future actions to help stabilize the economy. Such actions would include stimulating the U.S. economy by printing more money to act as a stimulus. • What do you think happened to the value of the US dollar relative to foreign currencies?