forex ca final

Save Share

This query is : Resolved

anurag (Querist)

05 December 2010 In case of appreciation or depreciation of a currency , in which currency adjustment is to be made i.e. in same currency which is appreciated/depreciated or in opposite currency
for eg:
Q. $1=200rubles.find future exchange rate if
(1)value of rubles is appreciated by 10%
(2)value of rubles is depreciated by 10%
(3)value of dollar is appreciated by 10%
(4)value of dollar is depreciated by 10%
SOLUTION A=reverse adjustment is made in same currency
(1)$1=R200-10%
$1=R180
(2)$1=R200+10%
$1=R220
(3)$1-10%=R200
$0.9=R200
(4)$1+10%=R200
$1.1=R200
or,
SOLUTION B=given adjustment is made in opposite currency
(1)$1+10%=R200
$1.1=R200
(2)$1-10%=R200
$0.9=R200
(3)$1=R200+10%
$1=R220
(4)$1=R200-10%
$1=R180

which solution is correct and why? plz give ur advice.
i am confused that in which currency effect should be given i.e, in same currency or opposite currency or in home currency?
regards

B. Hari Gopal

B. Hari Gopal (Expert)

05 December 2010 Your Solution A is correct.

In India, Rs is the base currency and depreciation or appreciation will be calculated for Rs

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now