Exchange Rates

An exchange rate tells you how much one country's currency is worth in terms of another country's currency. In other words, it's the price of one currency in terms of another. For example, if the exchange rate is 1.25 Euros for 1 US Dollar, it means 1.25 Euros can be exchanged for 1 US Dollar and that 1 US Dollar can be exchanged for 1.25 Euros.

Many people follow exchange rates very closely because they change over time. This means that the cost of doing business with another country can fluctuate over time.

• When one currency can be exchanged for more of another currency than before, we say it's getting stronger.
• When one currency can be exchanged for less of another currency than before, we say it's getting weaker.

When comparing two currencies, any relative change in value means that one currency got stronger and the other got weaker.

Often we'll say things like the exchange rate is $1.25 Euros per dollar. But that's kind of wordy. It's often easier to just give the number, followed by the word direct or indirect.

• Direct tells you how many units of a foreign currency you receive for every unit of your own currency. In other words, a direct quote will tell you how much of a foreign currency you receive for exactly one unit of your own.
• Indirect tells you how many units of your own currency someone will receive for every unit of the foreign currency. In other words, an indirect quote will tell you how much of your own currency is equal to exactly one unit of the foreign currency.

👉 Answer:

👨‍🎓 Here are the steps to figure it out:

1. First, remember the direct exchange rate is how many of our own currency it takes to buy one unit of the foreign currency.
2. In this case, we know that the direct exchange rate:
   0.6485 YEN = 1 WON
3. Let's divide both sides by the direct exchange rate, so we can see how much each of our domestic yen is worth.
   0.6485 YEN / 0.6485 = 1 WON / 0.6485
4. This tells us how much each of our domestic yen is worth in yen. This is known as the indirect exchange rate.
   1 YEN = 1.5419 WON
5. We don't have 1 yen though, we have 52.37 of them. Let's multiply both sides by 52.37.
   1 YEN * 52.37 = 1.5419 WON * 52.37
6. Now let's just solve the equation and find out how many won our yen are worth.
   52.37 YEN = 80.75 WON