Question

Mr. Rajan invested Rs. 1,00,000 in US Stock Markets when the GBPINR rate was 75. After one year his investment appreciated by 20% in GBP terms. He sold off his investments and repatriated the money to India at the then existing rate of 80. What were real returns in INR?

Answer 1

Hint: Convert the initial money (i) invested by Mr. Rajan from rupees to dollars, 1 dollar =75 rupees. Find the 20% of this money and add the 20% to the initial money. Now the money is in dollars. Convert the dollars into rupees where 1 dollar = 80 rupees now, and we now have final money (f). Now, find the profit of this money by subtracting the initial money (i) from the final money (f) and then divide it by initial money (i) and multiply the result with 100.


Complete step-by-step solution:
We are given that Mr. Rajan initially invested Rs. 1,00,000 in US Stock Markets, 1 dollar=75 rupees here.
1 rupee= 1/75 dollars.
$
  Rs.1,00,00 = ?dollars \\
   \to 1,00,00 \times \dfrac{1}{{75}}dollars \\
   \to \dfrac{{100000}}{{75}} \\
   = \dfrac{{4000}}{3}dollars \\
 $
After one year, his investment is appreciated by 20%.
20% of 4000/3 dollars is
$
   \to \dfrac{{20}}{{100}} \times \dfrac{{4000}}{3} \\
   \to \dfrac{{800}}{3}dollars \\
 $
Therefore, Mr. Rajan’s investment after 20% appreciation is
$
   = \dfrac{{4000}}{3} + \dfrac{{800}}{3} \\
   = \dfrac{{4800}}{3} \\
   = 1600dollars \\
 $
Now, convert the above money which is in dollars to rupees, 1 dollar=80 rupees now.
$
  1dollar = 80rupees \\
  1600dollars = \left( {1600 \times 800} \right)rupees \\
   = 1,28,000rupees \\
 $
Rajan’s investment of Rs. 1,00,000 becomes Rs. 1,28,000 in one year.
$Profit\left( \% \right) = \dfrac{{\left( {Final{\text{ }}money{\text{ }}-{\text{ }}Initial{\text{ }}money} \right)}}{{Initial{\text{ }}money}} \times 100$
Final Money=Rs. 1,28,000
Initial Money=Rs. 1,00,000
$
  profit\left( \% \right) = \dfrac{{1,28,000 - 1,00,000}}{{100000}} \times 100 \\
   = \dfrac{{28,000}}{{100000}} \times 100 \\
   = 0.28 \times 100 \\
   = 28\% \\
 $
Therefore, Rajan received a gain of 28% i.e. Rs. 1,28,000


Note: Appreciation is an increase in the value of an asset over the time. The increase can occur for a number of reasons, including increased demand, or as a result of changes in interest rates. If the demand for Indian rupee is high, Indian rupee will appreciate. This is called rupee appreciation.