Exchange Rate

The exchange rate defines the rate at which one nation’s currency may be exchanged for another currency. For example, if the U.S. exchange rate for the Canadian dollar is $1.11, that means that one U.S. dollar may be exchanged for 1.11 Canadian dollars.

The exchange rate starts with a single unit of the home country’s currency. To figure out the reverse exchange rate, we simply reverse the ratio. For example, if the U.S. exchange rate for the Canadian dollar is $1.11 and you want to know what the Canadian exchange rate is for the U.S. dollar, simply divide 1 by 1.11. 1 divided by 1.11 is 0.90. So the Canadian exchange rate for the U.S. dollar in this example would be 0.90, meaning that for $1 Canadian you could buy $0.90 U.S.