The exchange rate at the beginning of a year between the Indian Rupee (R) and the U. S. dollar is R43.125/$. The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively. What would be the new exchange rate at the end of the year? R37.327/$ R0.0267/$ R49.8224/$ $37.327/R

Question

Konnor

Business

14 August, 18:42

The exchange rate at the beginning of a year between the Indian Rupee (R) and the U. S. dollar is R43.125/$. The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively. What would be the new exchange rate at the end of the year? R37.327/$ R0.0267/$ R49.8224/$ $37.327/R

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Answers (1)

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Elianna Acosta · Answer 1

The correct answer is R49.8224/$.

Explanation:

According to the scenario, the computation of the given data are as follows:

Exchange rate at beginning = R43.125/$

Inflation rate in India = 19%

Inflation rate in U. S. = 3 %

So, we can calculate the New exchange rate by using following formula:

New exchange rate = Beginning exchange rate * (Inflation A : Inflation B)

= R 43.125 * (1.19 : 1.03)

= R 49.8224/$