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Depreciation of Currency |
Exchange Rate
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For example, suppose the spot rate is Rs. 50 per dollar, and the one
year forward rate is Rs. 55 per dollar.
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Illustration 1:
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Rs. 47.10 – 47.25 per dollar is a direct quote. Another direct quote is
¥/£ 1 79-180.
Answer:
(a) The country where the quote is made.
(b) The bid, ask and spread.
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Solution:
Illustration 2:
The rate quoted by a Chennai banker is 70-72 per pound. Compute the
relevant pound per Re rate.
Solution:
Bid (Pound/Rs.) = 1/Ask (Rs./Pound) = 1/72 = 0.01388
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Illustration 3:
Consider the following Rupee/SGD direct quote of ICICI
Mumbai: 26.50 – 75:
a. What is the cost of buying Rs.55,000?
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Solution:
a. Cost of Buying Rs.55,000:
i. This is direct quote for the Singapore dollar. Rs.26.50 is the bid rate
and Rs.26.75 is the ask rate.
ii. We want to buy Rs.55,000 i.e. the bank will have to sell Rs.55,000.
The relevant rate is the bank’s Ask rate for Rs.
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Related Articles:
1. Direct and Indirect Methods of Quoting Exchange Rate
2. Difference between Currency Depreciation and Currency Appreciation