4.0 Review
Discussion: a) When visiting abroad for an educational excursion, you cannot buy goods and food items there by spending Nepali rupees — you must first exchange them for the local currency of that country. b) Sagun, a businessman who imports goods from abroad, cannot pay his bills in Nepali rupees either — he must pay in the foreign supplier's currency, obtained by exchanging Nepali rupees (or by directly holding foreign currency earnings). c) When Nepali people working abroad send money home, their family receives it converted into Nepali rupees, at the exchange rate the remittance company or bank applies on that day. In each of these situations, wherever we go or conduct business, we use the currency of the respective country; a family receiving money from abroad gets it in Nepali currency.
4.1 Currency and Exchange Rate
| Country | Currency | Unit | Buying rate (Rs.) | Selling rate (Rs.) | Symbol |
|---|---|---|---|---|---|
| India | Indian Rupees | 100 | 160.00 | 160.15 | ₹ |
| America | American Dollar | 1 | 127.35 | 127.95 | $ |
| Countries in European Union | Euro | 1 | 128.13 | 128.73 | € |
| UK | Pound Sterling | 1 | 150.94 | 151.65 | £ |
| Switzerland | Swiss Frank | 1 | 133.13 | 133.76 | CHF |
| Australia | Australian Dollar | 1 | 87.82 | 88.23 | AUD$ |
| Canada | Canadian Dollar | 1 | 98.08 | 98.54 | CAD$ |
| Singapore | Singapore Dollar | 1 | 91.68 | 92.11 | SGD$ |
| Japan | Japanese Yen | 10 | 9.32 | 9.37 | ¥ |
| China | Chinese Yuan | 1 | 18.70 | 18.79 | ¥ |
| Saudi Arabia | Saudi Arabian Riyal | 1 | 33.91 | 34.07 | SAR |
| Qatar | Qatarian Riyal | 1 | 34.82 | 34.98 | QAR |
| Thailand | Thai Bhat | 1 | 3.57 | 3.59 | THB |
| United Arab Emirates | United Arab Emirate Dirham | 1 | 34.67 | 34.83 | AED |
| Malaysia | Malaysian Ringgit | 1 | 28.45 | 28.58 | MR |
| South Korea | South Korean Won | 100 | 9.58 | 9.63 | W |
| Sweden | Swedish Krona | 1 | 12.07 | 12.12 | SEK |
| Denmark | Danish Krone | 1 | 17.23 | 17.31 | DKK |
| Hongkong | Hongkong Dollar | 1 | 16.23 | 16.31 | HKD |
| Kuwait | Kuwaiti Dinar | 1 | 414.23 | 416.18 | KD |
| Bahrain | Bahrain Dinar | 1 | 337.80 | 339.39 | BD |
a) The exchange rate of currency in Nepal is determined by Nepal Rastra Bank (the central bank / government). b) If the currency of America is called dollar, the currency of China is called Yuan. c) The selling rate is higher than the buying rate because the bank must make a profit (or cover its costs) on each currency exchange transaction — it buys foreign currency from customers at a lower price and sells it to other customers at a slightly higher price. d) The buying rate is the rate at which a bank or financial institution buys foreign currency from a customer (giving Nepali rupees in exchange); the selling rate is the rate at which a bank or financial institution sells foreign currency to a customer (taking Nepali rupees in exchange).
- The exchange rate of the currency of one country to another will be determined by the government or central bank of the country. Such a rate is called the foreign currency exchange rate. In our country, the exchange rate with India is fixed, and the exchange rate with other countries is variable. In our country, the exchange rate is declared by Nepal Rastra Bank. The exchange rate given by a bank or other financial institution while purchasing foreign currency is called the buying rate. Similarly, the exchange rate fixed by a bank or other financial institution while selling foreign currency is called the selling rate.
- While exchanging currency of other countries in Nepal, the currency of the country can be obtained after exchanging into Nepali currency first. The banks give Nepali rupees for foreign currency at the buying rate, and foreign currency for Nepali rupees at the selling rate to us.
- The alternative process of finding the values of unknown variables other than the unitary method, ratio and proportion is the chain rule. Let , and be the currencies of different countries. If , and , then (the products on each side, formed by multiplying the numeric value of each equation together in the same order the currencies were introduced, must balance) — this lets an unknown exchange value be isolated even when a chain of several currencies is involved.
Based on the exchange rate given above, find the difference between buying and selling price of pound sterling 500.
Solution: According to the buying rate, 1 pound sterling Rs. . Buying price of 500 pound sterling Rs. . Again, according to the selling rate, 1 pound sterling Rs. . Selling price of 500 pound sterling Rs. . Hence, the difference between selling price and buying price Rs. . (Flag: the textbook's own printed solution shows the buying price as Rs. and the final difference as Rs. ; multiplying correctly gives Rs. , not Rs. , so the source contains an arithmetic slip — the figures here are the corrected ones.)
The exchange rate between the American Dollar and Nepali rupees for a specific day is $1 = Rs. 126.35. a) How many American Dollars can be exchanged for Rs. 85,500? b) How many rupees can be exchanged for $3,000?
Solution: a) $1 = Rs. , so Rs. , giving Rs. . So Rs. . b) Again, $1 = Rs. , so $3000 = Rs. .
Based on the above-mentioned exchange rate, change the following currencies: a) 1 Canadian Dollar into Japanese Yen. b) 250 Australian Dollar into Swiss Frank.
Solution: a) 1 Canadian Dollar Rs. (buying rate), so Re. Canadian Dollar ...(i). Again, 10 Japanese Yen Rs. (selling rate), so Rs. Japanese Yen ...(ii). From (i) and (ii): Canadian Dollar Japanese Yen, so 1 Canadian Dollar Japanese Yen. b) 1 Australian Dollar Rs. (buying rate), so Rs. Australian Dollar ...(i). Again, 1 Swiss Frank Rs. (selling rate), so Rs. Swiss Frank ...(ii). From (i) and (ii): 1 Australian Dollar Swiss Frank, so 250 Australian Dollar Swiss Frank.
If American Dollar ($) 500 = Pound Sterling (£) 390 and Nepali Rupees Rs. 7,547 = Pound sterling (£) 50, find how many American Dollars can be exchanged for Nepali Rupees 10,308?
Solution: Let American dollar Nepali Rupees Rs. . Write the given relations in order: ; ; . Using the chain rule: , so . Hence, $87.55 can be exchanged for Nepali Rupees .
A businessman exchanged Nepali Rupees 8,40,000 at the exchange rate of the Pound Sterling (£) 1 = Rs. 150. After 5 days, Nepali currency is deflated by 5% and then he exchanged Nepali currency into Pound Sterling. How much profit or loss does he get?
Solution: The businessman exchanged Nepali rupees for Pound Sterling at Rs. , so Rs. , giving Rs. . Since Nepali currency is deflated by in 5 days, the new exchange rate is: of . Now he exchanges his Pound Sterling back into Nepali Rupees at this new rate: . Since Rs. Rs. , he gets a loss. Loss amount Rs. . (Flag: the textbook's own printed solution states the loss as Rs. ; subtracting the figures it itself derives, Rs. , correctly gives Rs. , not Rs. — the source has an arithmetic slip here, and the figure above is the corrected one.)
A businessman of Nepali origin from Norway purchased 900 Pasmina shawls at the rate of Rs. 4,000 in Kathmandu. He exported by paying 5% export tax and then at how much Euro should he sell all the shawls at the profit of 20%? (€1 = Rs. 130)
Solution: The price of a Pasmina shawl Rs. . The cost of 900 shawls Rs. . The cost price of the shawls including export tax Rs. of Rs. . We know that €1 Rs. , so Rs. , giving Rs. . So the total cost price in euro . To sell at profit, the total selling price of 900 shawls . Hence, the selling price of all the shawls .