Foreign currency appreciation will result in rupee receipts

Looking for the answer to the question below related to Financial Management ?

Foreign currency appreciation will result in rupee receipts

 Options:

A. Lower
B. Higher
C. Unchanged
D. None of these

The Correct Answer Is:

  • B. Higher

Foreign currency appreciation will result in rupee receipts because it leads to higher exchange rates. When a foreign currency appreciates, it means that it increases in value relative to the domestic currency. In this case, the domestic currency is the rupee. A higher exchange rate means that it takes more rupees to purchase one unit of foreign currency.

When the exchange rate is higher, it benefits those who receive payments or remittances in the foreign currency. For example, if an individual or a business receives payments in US dollars and the dollar appreciates against the rupee, they will receive more rupees for the same amount of dollars. This results in higher rupee receipts.

Here are the explanations for why the other options are not correct:

A. Lower:

If the foreign currency appreciates, it means that the exchange rate increases. This indicates that it takes more rupees to purchase foreign currency. Therefore, lower rupee receipts would not be expected.

C. Unchanged:

If the exchange rate remains unchanged, it means that the foreign currency does not appreciate the rupee. In this scenario, the amount of rupees received would not be affected, resulting in unchanged rupee receipts.

D. None of these:

This option suggests that there may be a different outcome that is not mentioned among the provided options. However, considering the relationship between foreign currency appreciation and exchange rates, it is logical to conclude that higher rupee receipts are the likely result.

Conclusion

In conclusion, when a foreign currency appreciates, it leads to higher exchange rates, resulting in higher rupee receipts. This occurs because it takes more rupees to purchase the appreciating foreign currency. Therefore, option B, “Higher,” is the correct answer.

The other options (A, C, and D) are not correct because they do not align with the relationship between foreign currency appreciation and exchange rates.

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