An indirect exchange rate can be converted to a direct exchange rate by:
A) dividing the indirect rate by the 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, we need to take the inverse of the indirect rate. This can be done by dividing 1 by the indirect rate or by finding the reciprocal of the indirect rate. This will give us the direct exchange rate, which is the number of units of the other currency that can be purchased with one unit of the domestic currency.

An Indirect Exchange Rate Can Be Converted to a Direct