Exchange rates: devaluation and revaluation
A relative abroad sends you US dollars, and you change them at a bank. Change the amount, and devalue or revalue the Nepali rupee, and see how many rupees you get.
Core concept
If the rupee is devalued by R%, the rupees for one dollar rise by R% of the old rate; if it is revalued by R%, they fall by R%
Topic: Currency and exchange
A bank buys foreign money from customers at its buying rate and sells it at its selling rate, which is a little higher; the difference is how the bank earns. Here the bank buys 1 US dollar (USD) for Rs 132. When the Nepali rupee is devalued by R%, it is worth less, so one dollar buys R% more rupees: the new rate is 132 × (1 + R/100). When the rupee is revalued by R%, it is worth more, and one dollar buys R% fewer rupees: 132 × (1 − R/100). Devaluation helps people who receive foreign money and makes imports dearer.
What you will learn
- Change foreign currency into Nepali rupees at a given rate.
- Find the new exchange rate after devaluation or revaluation.
- Find the gain or loss caused by the change.
Before you start
- Know how to find a per cent of an amount.
Materials
- A notebook and a calculator; a newspaper's exchange rate table if you have one
Equipment
- None
Procedure
- Record 500 USD with the rupee devalued by 5%.
- Change to revaluation and record.
- Make the change 0% and record.
How this simulation is simplified
- The bank buys 1 USD for Rs 132 before the change, and charges no commission.