Understanding how to calculate an exchange rate is essential for anyone dealing with foreign currencies, whether you're traveling, investing, or conducting international business.

Exchange Rate Formula = First (Base) Currency / Second (Ending) Currency. For example, an interbank exchange rate of 1.13 for EUR/USD means that €1 could be exchanged for $1.13.

The average of the exchange rates is calculated after assigning the weightings for each rate. For example, if a currency had a 60% weighting, the exchange rate would be raised to the power by 0.60.

The 110,000 U.S. dollars we own are converted back into euros at the new exchange rate of 1.0800 dollars per euro. The 110,000 U.S. dollars convert back into 101,851.85 euros at the new exchange rate.

Exchange Rate Formula = First (Base) Currency / Second (Ending) Currency. For example, an interbank exchange rate of 1.31 for GBP/USD means that £1 could be exchanged for $1.31. Meanwhile, the ...