Introduction to Corporate Finance

Ross et al.: Fundamentals

of Corporate Finance, Sixth

Edition, Alternate Edition

VIII. Topics in Corporate Finance

22. International Corporate Finance

© The McGraw−Hill^779

Companies, 2002

Exchange Rates

An exchange rateis simply the price of one country’s currency expressed in terms of
another country’s currency. In practice, almost all trading of currencies takes place in
terms of the U.S. dollar. For example, both the Swiss franc and the Japanese yen are
traded with their prices quoted in U.S. dollars. Exchange rates are constantly changing.
Our nearby Work the Webbox shows you how to get up-to-the-minute rates.

Exchange Rate Quotations Figure 22.1 reproduces exchange rate quotations as they
appeared in The Wall Street Journalin 2001. The first column (labeled “U.S. $ equiv.”)
gives the number of dollars it takes to buy one unit of foreign currency. Because this
is the price in dollars of a foreign currency, it is called a director American quote

CHAPTER 22 International Corporate Finance 753

FIGURE 22.1

Source: Reprinted by permission of The Wall Street Journal,© 2001 Dow Jones & Company, Inc., September 5,

2001. All Rights Reserved Worldwide.

Exchange Rate Quotations

exchange rate

The price of one

country’s currency

expressed in terms of

another country’s

currency.