Question

The ruiz family is exchanging euros for us dollars. the exchange rate is 1 euro equals 1.35261 usd. since the ruiz family knows that usd are stated to the nearest hundredth of a dollar, they used the conversion ratio 1.35 usd. will this give the ruiz family the correct i 1 euro unit exchange? explain

Answer 1

No, rounding the conversion ratio won't provide the Ruiz family with the most accurate response.

What is a Conversion Ratio?

The number of common shares each convertible security receives when converted is known as the conversion ratio. The more common shares are exchanged for each convertible security, the higher the ratio.

According to how many euros they intend to convert, it will vary. If the amount is less it won't make any difference by rounding off but if the Amount is large it will make a considerable loss.

If they only exchanged one euro they would get $ 1.35 whatever rate they used, but imagine it was a thousand euros – at the right rate they would get $ 1352.61, at the proposed rate they would only get $ 1350.

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