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Foreign Exchange Risk and Exposure

Foreign Exchange Risk and Exposure

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Published by Neeraj Kumar
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Published by: Neeraj Kumar on Apr 13, 2009
Copyright:Attribution Non-commercial

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09/15/2013

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Foreign Exchange Exposure &Risk 
 
 
Foreign Exchange Exposure
If V
0
= 1,00,000 $ = Rs 43,00,000 /-(Rs/$ =43.00)Over a period of time, price of asset changesdue to inflation and exchange rate alsochanges. So,V
1
= 1,40,000 $ = Rs 53,20,000 /-(Rs/$ = 38.00)
 
 
The actual change
ΔV = V
1
– V
0
= 53,20,000 – 43,00,000= Rs 10,20,000ΔS = S
1
- S
0
= 43.00 – 38.00 = Rs 5.00
So, For ΔS = 11.6%For ΔV = 23.7%ΔS may be both positive and negative and so may be ΔV

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