An exchange rate is the value of a country’s currency versus that of another country or economic zone. Most exchange rates are free-floating and will rise or fall based on supply and demand in the market.

The exchange rate plays an important role for country’s when exporting goods and import raw materials.

**Formula to calculate exchange rate.**

**Example:**

If we exchange $100 and for euros,we get €80 back. Calculate the exchange rate.

Therefore, the exchange rate is 1.25.