ibani mobile app to calculate an exchange rate

How to calculate an exchange rate?

Reading time: 5 minutes | Updated:

By Brice DELHOME, Currency Expert

Finance & Currency Expertise Rates & Forecasts
📌 In short: calculating an exchange rate
  • The formula: to calculate an exchange rate, multiply the starting amount by the rate. With an EUR/CHF rate of 0.95, 1,000 € × 0.95 = 950 CHF.
  • The inverse rate: divide 1 by the known rate. With EUR/CHF at 0.95, the CHF/EUR rate is 1 / 0.95 = 1.0526, and a salary of 5,000 CHF gives 5,263 €.
  • Interbank rate vs. bank rate: the rate shown by Google is the interbank rate; traditional banks add an exchange margin (spread) of around 1.5% to 3%.
  • The cost of the margin: for 10,000 CHF converted at an interbank CHF/EUR rate of 1.05, a 2% margin cuts the amount received from 10,500 € to 10,290 €, a loss of 210 €.

Table of contents

  1. What is an exchange rate and why does it change?
  2. How do you calculate an exchange rate?
  3. How to calculate an inverse exchange rate?
  4. Which fees distort the calculation of an exchange rate?
  5. Which tools should you use to calculate an exchange rate?
  6. Conclusion
  7. Frequently Asked Questions

1. What is an exchange rate and why does it change?

What is an exchange rate?

An exchange rate represents the value of one national currency against another. In financial terms, it is the multiplier used to convert the money of one country into the currency of another country. Currencies are identified by their ISO code (e.g., CHF for the Swiss Franc, EUR for the Euro).

If the CHF/EUR currency pair displays a rate of 1.05, it means that one (1) Swiss Franc buys 1.05 Euros. This market rate (called Forex) is never fixed: it fluctuates every second during business days.

Why do exchange rates vary?

The currency market responds to the law of supply and demand, influenced by deep macroeconomic factors:

  • Central bank decisions: An increase in interest rates by the SNB (Swiss National Bank) will make the CHF more attractive to investors.
  • Inflation: A country whose inflation is lower than that of its trading partners tends to see its currency appreciate against them.
  • Safe-haven status: In times of geopolitical or economic crisis, investors massively buy Swiss Francs, mechanically increasing its value.

2. How do you calculate an exchange rate?

The basic mathematical formula

Manual calculation simply requires multiplication. Here is the standard formula:

Amount (Starting Currency) × Exchange Rate = Amount (Target Currency)

Practical conversion example

Suppose you want to convert 1,000 Euros into Swiss Francs, and the current official EUR/CHF exchange rate is 0.95. The calculation will be as follows:

1,000 € × 0.95 = 950 CHF

In this scenario, your 1,000 euros will give you exactly 950 Swiss francs (excluding any bank fees).

3. How to calculate an inverse exchange rate?

It frequently happens that you know the rate of the EUR/CHF pair (e.g., 0.95), but you need to do the calculation in the opposite direction (CHF to EUR). To obtain the inverse exchange rate, the mathematical operation consists of dividing the number "1" by the known exchange rate:

Inverse Rate = 1 / Initial Exchange Rate

Using our example (EUR/CHF at 0.95), the rate of the inverse pair (CHF/EUR) will be:

1 / 0.95 = 1.0526

This means that 1 Swiss franc equals 1.0526 euros. To convert a cross-border salary of 5,000 CHF into Euros, you will use this inverse rate:

5,000 CHF × 1.0526 = 5,263 €

4. Which fees distort the calculation of an exchange rate?

Interbank Rate vs. Bank Rate

The rate you find on Google is the interbank rate (the wholesale price at which banks exchange money with each other). However, traditional banking institutions apply a Spread (Exchange margin). They buy the currency at the wholesale price, and sell it back to you at a higher price, granting themselves an invisible margin of around 1.5% to 3%.

Numerical example of the "hidden margin"

Imagine you want to transfer 10,000 CHF into Euros. The real interbank rate (CHF/EUR) is 1.05. The real value of your money is therefore 10,500 €.

Your bank applies its own hidden margin of 2%. It will not offer you the rate of 1.05, but a degraded rate of 1.029. The calculation becomes:

10,000 CHF × 1.029 = 10,290 €

Result: You lose 210 € in the operation, absorbed by the invisible exchange fees of the bank. It is to overcome this injustice that specialized alternatives exist.

10,000 CHF converted (interbank CHF/EUR rate of 1.05)Rate appliedAmount receivedCost of the margin
Interbank rate, no margin1.0510,500 €0 €
Bank with a 2% margin1.02910,290 €210 €
ibani, margin of 0.40% at most on this amount1.045810,458 €42 €

5. Which tools should you use to calculate an exchange rate?

Online currency converters

There are many converters that allow you to get the instant rate. The best known, like the Google Converter or XE, display the gross interbank rate. They are perfect for an estimate, but do not reflect the amount you will actually get via your bank. You can also calculate an exchange rate with our converter, which displays the real market rate for every currency pair.

The transparent ibani calculator

To get an exact conversion with full transparency, use the ibani rate calculator below. Unlike banks, ibani starts from the real-time market rate, plus a transparent, sliding margin of 0.40% to 0.15% depending on the amount.

In the example above (CHF 10,000), the ibani margin is at most 0.40%, i.e. around 42 € instead of 210 €.

SELLEUR xxx
xxx BUYEUR
  • Our transfer fees: CHF 0
  • Our exchange margin: 0.40%
  • Final exchange rate: 1.1636
  • You'll save on average now
Sign up now to enjoy the best rates

6. Conclusion

Calculating an exchange rate simply requires multiplying the starting amount by the current rate. However, the main challenge lies not in the mathematical calculation, but in the choice of the financial intermediary. By using specialized platforms that start from the real interbank rate and show a reduced margin (like ibani), you reduce what the exchange margin takes from each conversion.

7. Frequently Asked Questions

The real exchange rate, or interbank rate, can be found on financial platforms or by using online currency converters. It is the rate used between major financial institutions to trade currencies, without the margin a bank then adds for its customers.

To get the best exchange rate, compare offers from different providers. With a specialized service like ibani, the margin is shown in advance: from 0.40% to 0.15% depending on the amount, against a bank spread of around 1.5% to 3%.

The official exchange rate can be found on central bank websites, platforms that track the foreign exchange market (Forex), or directly via search engines. This rate reflects the current market price without any markup.

To minimize exchange fees, use services that start from the real market rate and show their margin in advance, like ibani, whose margin ranges from 0.40% to 0.15% depending on the amount. Absolutely avoid conversions via airport counters or traditional banks which apply high hidden margins.

The interbank rate is the rate at which major banks exchange currencies with each other, representing the true value of a currency. The spread is the difference between this real rate and the rate the bank charges you (its profit margin).

Official sources

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