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30 July, 09:28

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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  1. 30 July, 09:38
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    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/$
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