jnu

[anon_econ]

@ am.m
yes, 0.5 bcoz it's half a year.
in the other question it would be 56/1.12 + 55/(1.12)^0.75 bcoz 9 months=3/4 of a year.

[AJ]

@ vasudha...

Ummm, I am copying the question again, I hate scrolling up..

Current acc. Balance =-400
Capital exports is =700
Imports is 800
Change in reserves =-100
Net invisible receipts 100

ya,... change in reserves is net inflow of forex.. which is negative here... -100

so basically overall there was an outflow of 100

net current a/c outflow.. = 400
so net capital a/c outflow shud be (-300) ... i.e. net inflow of 300 .... we have capital exports as 700..so imports shud be 400.... so that net inflow becomes 300 ....

using ur equation we get....

 capital inflow-capital exports+current a/c balance=change in reserves

capital inflow-(700)+(-400)=(-100) ...

capital inflow= 1000

...so answer are diff.....

I can be wrong..I am too sleepy right now.. :)

[anon_econ]

AJ,
net inflow is 300. my formula gives u gross inflow. r v not supposed to calculate gross inflow?
btw thanks 4 pasting the question here

[a.m]

@ Vasudha
by using your formula for this question, i reached at the conclusion that the exports are 300 and Capital inflow is 1000.

[a.m]

@ Vasudha
by using your formula for this question, i reached at the conclusion that the exports are 300 and Capital inflow is 1000.

[aastha]

@ vasudha

while calculating the present value for 9 months shouldnt the dicounting factor also change since 12% is for a year, so it should be 9% for 9 months . . . so the pv becomes for the option 2  55/(1.12)  + 55/(1.09)^3/4 which comes out to be 100.67 . . .

wht do you think ???

[anon_econ]

no aastha if u r raising it to the power 3/4 then u r already taking account of the fact that u get interest for 9 months..

[AJ]

Hi vasudha...

Ummm, One really basic (and I think stupid) doubt...

Does capital export means Capital inflow....?????
(I am taking both as same, like we export Capital goods and so there's and inflow of capital) ... :(

Sorry for bothering u too much...bt plsss clear this identity for once....

[anon_econ]

Oh. I took capital exports to be capital outflows. I could be wrong. Let someone else respond.

[ritu]

@ vasudha nd aj....
i think vasudha is right....exporting capital is infact a capital outflow....we are exporting our present purchasing power to some other country which has investment prospects but no money....so we are "giving" this money to them....either as FDI,FII.....or wotever.....which will come back to us in future....capital inflow is foreign capital coming in our country....so its a capital import......capital acc is in surplus when inflow is greater than outflow..:)

[kratika]

@neha- could u plz clarify one more doubt...for calculating present value of 55rs for 6 months, is there a difference in approach if i divide the interest rate by 2 n then use it to discount the given value(i.e 55/1.055) or if i take the interest rate as 11% only but the time period as 1/2 (i.e 55/[1.11]^0.5)...even though the answer is coming out to be same in both cases

[AJ]

@ ritu.... ohhhhhhhhh.. Now I get it..

@vasudha.. Yup! U r right....

Thanks guys.... :)

[neha]

Hi Kratika,,, i guess yes,, these two approaches are definitely different, although in this question the conclusion that we draw using either of them happens to be the same,,,
I think if u are dividing the rate of interest by 2,, it means the rate is effective rate of interest per half year ,,, so the present value equation becomes
  [55/1.055^1] +  [55/1.055^2]