Definitions of Exchange rates Exchange rates are quoted as foreign currency per unit of domestic currency or domestic currency per unit of foreign currency Suppose you are U.s. citizen How much $s can be exchanged for one yen? Es￥=$0.011185/￥( direct or American"term) How much yen can be exchanged for one dollar? Ey/s=*89.40/(indirect or European"term) Exchange rates allow us to denominate the cost or price of a good or service in a common currency. How much does a nissan cost? 42500, 000 Or,￥2500000XE(0.011185)=$2796250 14-3Copyright © 2012 Pearson Education. All rights reserved. 14-3 Definitions of Exchange Rates • Exchange rates are quoted as foreign currency per unit of domestic currency or domestic currency per unit of foreign currency. Suppose you are U.S. citizen: – How much $ can be exchanged for one yen? E$/¥=$0.011185/¥ (direct or “American” term) – How much yen can be exchanged for one dollar? E¥/$=¥89.40/$ (indirect or “European” term) • Exchange rates allow us to denominate the cost or price of a good or service in a common currency. – How much does a Nissan cost? ¥2,500,000 – Or, ¥2,500,000 x E$/¥(0.011185) = $27,962.50