Question

Suppose that the exchange rate between the U.S. dollar and the Euro is $1.10 per Euro....

Suppose that the exchange rate between the U.S. dollar and the Euro is $1.10 per Euro. Is this the direct quote or the indirect quote? If this is the direct quote, what is the indirect quote?

I know that this is currently a direct quote. How do I convert it from a direct to an indirect quote? please show work!

Homework Answers

Answer #1

A currency quotation is the price of a currency in terms of another currency. For example, € = $1.10 means that one euro can be exchanged for $1.1. Alternatively; we may pay $1.1 to buy one dollar. A exchange quotation can be either a direct quotation and or an indirect quotation, depending
upon the home currency of the person concerned.
A direct quote is the home currency price of one unit foreign currency. Thus, in the aforesaid
example, the quote €1=$1.1is a direct-quote for an American.
An indirect quote is the foreign currency price of one unit of the home currency. The quote
$1=€0.909 is an indirect quote for an American. (€1/$1.1 =€.909 approximately)
Direct and indirect quotes are reciprocals of each other, which can be mathematically
expressed as follows.
Direct quote = 1/indirect quote and vice versab

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