An exchange rate is the value of one nation's currency expressed in terms of another nation's currency. It represents the rate at which one currency can be exchanged for another, determining how much of one currency you get in return for a unit of the other.

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Exchange rates can be free-floating, fluctuating based on supply and demand in the foreign exchange market, or fixed/pegged to the value of another currency. They play a crucial role in international trade, investment, and economic activity by affecting the cost of imports and exports and the relative value of currencies.

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Example:

If you see an exchange rate quoted as 1 EUR = 1.11 USD, it means that for every 1 Euro, you would get 1.11 US Dollars.

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So, if you exchange €50, you would receive:

€50 × 1.11 = $55.50 USD

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