Calculating selling rate for foreign currency exchange
I occasionally buy USD to load a prepaid debit card to buy things from online. My local currency is different (lets assume that my local currency name is 'A') and the amount and buying rate vary every time, naturally. Now some of my friends want me to buy some items for them using the debit card, what should be the ideal exchange rate if I don't want to profit or lose?
Lets say here's my buying history to load the debit card over time:
500 USD @ 1 USD = 10 'A' rate
300 USD @ 1 USD = 10.5 'A' rate
400 USD @ 1 USD = 11.1 'A' rate
Now if at any point someone ask for 600 USD to buy something, what should be the exchange rate? How do I calculate that?
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One way to look at it:
You have 12000 USD that cost a total of 12550 A, so the average exchange rate of 12550/12000 = 10.458 'A' rate. That means 600 USD cost you 6275 A, so that's what you would charge your friend. I think this makes sense only if you rarely buy USD and want to offer your friend the exact same benefits as you had by buying early at lower rates.
Another way to look at it:
Just use your most recent exchange rate (11.1), or today's exchange rate, assuming you are buying USD on a regular basis. I think this makes sense when you are regularly buying USD because it's fair to you (you have to buy more anyway), and it's fair to your friend (he's getting market price). Any benefit you got from earlier conversions are rightfully yours to keep.
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