Question

What is the 'exchange rate' of a currency?

Answer 1

The price of a nation’s currency in terms of another currency. An exchange rate thus has two components, the domestic currency and a foreign currency, and can be quoted either directly or indirectly. In a direct quotation, the price of a unit of foreign currency is expressed in terms of the domestic currency. In an indirect quotation, the price of a unit of domestic currency is expressed in terms of the foreign currency. An exchange rate that does not have the domestic currency as one of the two currency components is known as a cross currency, or cross rate.

Answer 2

An exchange rate thus has two components, the domestic currency and a ... Transaction, translation and economic risks can affect a company's balance sheet.