Question

Manish bought some American dollars for Rs 2,00,000. After four days, the Nepalese currency was devaluated in comparison to the American dollar by 5%. Manish exchanged the Nepali currency by giving American dollars on the day of the devaluation. How much does he gain or loss? Find it. (1$ = NRs 104.28)

A) Rs 5,000 gain
B) Rs 5,000 loss
C) Rs 10,000 gain
D) Rs 10,000 loss

Answer 1

Manish experiences a gain of approximately NRs 10,000 after the devaluation of the Nepali currency by 5% as he can exchange his American dollars for more Nepali currency than he initially spent.

Step-by-step explanation:

Manish exchanged his Nepali currency to American dollars when the exchange rate was 1$ = NRs 104.28. He initially bought dollars for Rs 2,00,000. After a devaluation of the Nepali currency by 5%, the new exchange rate would be NRs 104.28 + (5/100) × 104.28 = NRs 109.494. To find out how much Manish gains or loses, we need to determine how many dollars he bought initially and then calculate the amount in Nepali currency after the devaluation.

Initial exchange rate: 1$ = NRs 104.28

Amount spent in Nepali currency: NRs 2,00,000

Dollars bought: 2,00,000 / 104.28 = $1918.07 (approx)

Devaluation of 5%: New exchange rate = NRs 109.494

Nepali currency received after devaluation: $1918.07 × 109.494 = NRs 2,10,000.103 (approx)

Manish would receive NRs 2,10,000.103 after the devaluation for his $1918.07, which is NRs 10,000.103 more than what he initially spent. Hence, Manish will have a gain of approximately NRs 10,000.

Correct option: C) Rs 10,000 gain