Doubt on sfm: foreign exchange

Rs. is strengthening against $ i.e Rs. value is increasing, Therefore $ value is depreciating.

Current spot rate is Rs./$ = 45 i.e to buy 1 $ you need to pay Rs.45 Now since $ value is decreasing, you would need less Rs. than before to buy the same 1$.

Hence to buy 1$ in a year you would need = 45-(45*5%) = 42.75

agree with answer given by Mr. Nawaz. Since you already know the exchange rate, you need not convert it to dollar. The disparity in answers is due to the conversion.  Apparently, this is a very simple problem. The facts given are simple. Going by the facts, 42.75 is the right anwer (mind you, appeciation in the rupee by 5% does not mean that the dollar will also depreciate at the same rate. But since there are no other details given, adopt the first method.)

As Anjali ji said : In Actual, Appreciation of 5% in Rs. currency is not equal to depreciation of 5% in $ currency - which is know as segiel's paradox. But in examination or when solving any question - it can be ignored and appreciation of 5% in Rs. currency can be considered as a depreciation of 5% in $ (just mention that segiel's paradox has been ignored)