An indirect exchange rate can be converted to a direct exchange rate by:
A) dividing the indirect rate by number of U.S. dollars required to purchase one unit of the other currency.
B) dividing the indirect rate by 100.
C) multiplying the indirect rate by the spot rate.
D) taking the inverse of the indirect rate.

Question

Quizplus · Accepted Answer

To convert an indirect exchange rate to a direct exchange rate, you need to take the inverse of the indirect rate. This means that if the indirect rate is given as "x units of foreign currency per one unit of domestic currency," the direct rate would be "one unit of foreign currency per x units of domestic currency." Taking the inverse allows you to switch the numerator and denominator of the rate.

An Indirect Exchange Rate Can Be Converted to a Direct