Question

Manish initially exchanged Nepalese currency for American dollars at a rate of $1 = NRs. 104.28 for a total of Rs. 2,00,000. After four days, the Nepalese currency devalued by 5% against the American dollar. Manish then exchanged his American dollars back to Nepalese currency on the day of the devaluation. How much gain or loss did Manish incur?

a) Gain of Rs. 9999.63
b) Loss of Rs. 9999.63
c) Gain of Rs. 10,000.37
d) Loss of Rs. 10,000.37

Answer 1

Manish gained NRs. 10,000.37 after the devaluation of Nepalese currency by exchanging his American dollars back to Nepalese currency.

Step-by-step explanation:

Manish initially exchanged Nepalese currency (NRs) for American dollars at the rate of $1 = NRs. 104.28. For NRs. 2,00,000, he would get $1918.59 (calculated as 200000 / 104.28).

After four days, the Nepalese currency devalued by 5%. The new exchange rate would be the old rate increased by 5%, so $1 now equals to NRs. 109.494 (calculated as 104.28 * 1.05).

When exchanging his $1918.59 back to Nepalese currency at the new rate, Manish would get NRs. 210000.37 (calculated as 1918.59 * 109.494).

The gain incurred by Manish is the difference between what he ends up with and what he started with, which is NRs. 10,000.37 (calculated as 210000.37 - 200000). Therefore, the correct answer is (c) Gain of Rs. 10,000.37.