Business question

Learning Goal: I’m working on a writing question and need the explanation and answer to help me learn.

QUESTION ONE

a) A pegged exchange rate is one where a currency value is fixed against another currency, basket of other currencies or something of widely acceptable value such as the gold standard.

i). Discuss THREE reasons why a country may opt to adopt a fixed exchange rate (3 Marks)

ii). Enumerate THREE demerits resulting from heavy reliance on a floating exchange rate regime (3 Marks)

b) Explain THREE possible reasons why many developing countries are currently suffering from huge debt problems (3 Marks)

c) Capital circulation in the worldwide economy is important in fostering growth through matching of borrowers and lenders. Explain TWO instruments a country may employ to get foreign capital to support its development agenda (2 Marks)

d) In the recent past, some heavily indebted countries have pleaded with creditor countries to cancel and “forgive” their debts.

i). Argue TWO reasons for and ONE reasons against foreign debts write offs

(2 Marks)

ii). Analyze THREE factors which may influence the cost of borrowing for a country (2 Marks)

e) Enumerate TWO non-contractual techniques a firm can employ to shield itself against foreign risk exposure (2 Marks)