An Exchange Rate is the value of one currency expressed in terms of another currency.

It helps to calculate what amount of currency you’d get when exchanging or trading it for another currency.

Imagine going to France on a trip from the U.S.

Your U.S. dollars won’t work there, so you need to change them for euros (€), the currency used in Europe and France.

Currently, if you wanted to exchange USD $100, you’d get a little more than €98.34 excluding fees charged by whoever’s doing the conversion for you (like a bank or concurrency exchange vendor).

That puts the exchange rate at 1 USD = 0.983404 EUR.

On the way home, you’d exchange your euros back for U.S. dollars, and your €100 would be worth about USD $101.67.

This puts the exchange rate for 1 euro at 1 EUR = 1.01688 USD.