External value is tied or pegged to the currency values

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Reference no: EM1317851

Q1. Method A: Dig a ditch. The first cost would be $20,000 and $5,000 of re-digging and shaping would be required at 5-year intervals forever.

Method B: Lay concrete pipe. The first cost would be $100,000 and a replacement would be required at 15-year intervals at a net cost of $70,000 forever.

At an interest rate of 12%, which method is the better choice?

Q2. If a country's currency's external value is tied or pegged to the currency values of the country's leading trading partners, this arrangement is known as a 1.peg against the SDR.2.managed float.3.peg against a "basket" of currencies, or a composite 4.Currency board.

Reference no: EM1317851

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