Introduction to Finance

currency exchange rate 
value of 
one currency relative to another 
currency
direct quotation method 
indicates 
the amount of a home country’s 
currency needed to purchase one 
unit of a foreign currency
indirect quotation method 
indicates the number of units 
of a foreign currency needed to 
purchase one unit of the home 
country’s currency
TA B L E 6 . 1
Selected Foreign Exchange Rates, Late February 2016
Country
Currency
Foreign Currency in 
U.S. Dollars
(Direct Method)
Foreign Currency 
per U.S. Dollar 
(Indirect Method)
Australia
dollar
0.7128
1.4029
Brazil
real
0.2505
3.9925
Canada
dollar
0.7402
1.3509
China
yuan
0.1529
6.5390
European
euro
1.0933
0.9147
Hong Kong
dollar
0.1286
7.7747
India
rupee
0.0146
68.4932
Japan
yen
0.0088
113.9900
Mexico
peso
0.0547
18.2747
Russia
ruble
0.0133
75.1880
Singapore
dollar
0.7105
1.4075
South Africa
rand
0.0619
16.1488
Switzerland
franc
1.0037
0.9963
United Kingdom
pound
1.3873
0.7208
Sources: www.money.cnn.com and www.reuters.com.

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6.3 Currency Exchange Markets and Rates
137
know either the direct quotation or the indirect quotation. For example, the indirect quotation 
can be calculated, as follows:
Indirect 
Quotation =
1
Direct qoutation 
(6.1)
For illustration purposes, let’s use the euro versus U.S. dollar relationships previously noted. 
A euro was worth $1.0933 and represents a direct quotation, whereas the United States is the 
home country. To fi nd the indirect quotation, we would calculate,
Indirect Quotation =
1
$1.0933
= .9147 euros
Of course, if we knew that the indirect quotation for the euro relative to the dollar was .9147 euros 
per U.S. dollar, we could divide that value into one to get the direct quotation value: 1 ÷ .9147 = 
1.0933 or $1.0933.