Calculating Foreign Exchange Rates – Cost Calculator

Foreign Exchange Rate Calculator

Calculate currency conversion and factor in service fees

Amount to Convert (Sell)

Exchange Rate (1 Base = ?)

Transaction/Service Fee (%) Banks often charge a 1% to 3% margin or flat fee.

Conversion Summary

Total Received Amount: 0.00

Fee Deducted: 0.00

Effective Rate (After Fees): 0.00

How to Calculate Foreign Exchange Rates

Understanding how foreign exchange (FX) works is essential for international travelers, business owners, and investors. An exchange rate tells you how much one currency is worth in terms of another. For example, if the USD/EUR rate is 0.92, it means 1 US Dollar is equivalent to 0.92 Euros.

The Basic Conversion Formula

To calculate how much of a target currency you will receive, use the following mathematical formula:

            Target Amount = (Base Amount × Exchange Rate) × (1 – Fee Percentage)
        

Practical Example

Imagine you want to convert 1,000 British Pounds (GBP) into US Dollars (USD).

Base Amount: 1,000 GBP
Exchange Rate: 1.25 (1 GBP = 1.25 USD)
Bank Fee: 2%

Step 1: Calculate the gross conversion: 1,000 × 1.25 = 1,250 USD.

Step 2: Calculate the fee: 1,250 × 0.02 = 25 USD.

Step 3: Net amount: 1,250 – 25 = 1,225 USD.

Understanding the "Spread"

When you see a rate on Google or Reuters, that is the "mid-market rate." Banks and exchange kiosks rarely give you this rate. Instead, they add a "spread" or a markup. This hidden fee is why your calculation might differ from the amount the bank actually gives you. Always check the "Effective Rate" (Net Amount / Original Amount) to see the true cost of your transaction.