Q11-1 - A direct exchange rate is the number of local...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 11 MULTINATIONAL ACCOUNTING: FOREIGN CURRENCY TRANSACTIONS AND FINANCIAL INSTRUMENTS ANSWERS TO QUESTIONS Q11-1 Indirect and direct exchange rates differ by which currency is desired to be expressed in another currency. An indirect exchange rate is the number of foreign currency units that may be obtained for one local currency unit. The indirect exchange rate has the foreign currency unit in the numerator. As a fraction, the indirect exchange rate is expressed as follows: Number of foreign currency units One local currency unit
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: A direct exchange rate is the number of local currency units needed to acquire one foreign currency unit. The direct exchange rate has the local currency units in the numerator (the U.S. dollar for the direct exchange rate for the U.S. dollar). As a fraction, the direct exchange rate is expressed as follows: Number of local currency units One foreign currency unit The indirect and direct exchange rates are inversely related and both state the same relationship between two currencies....
View Full Document

This note was uploaded on 10/22/2008 for the course ACC 440 taught by Professor Henderson during the Summer '08 term at University of Phoenix.

Ask a homework question - tutors are online