If a Country Fixes the Exchange-Rate Value of Its Currency

question 126

Multiple Choice

If a country fixes the exchange-rate value of its currency, it will have to

• A) follow a highly expansionary monetary policy in order to maintain the convertibility of its currency.
• B) give up its monetary independence in order to maintain the convertibility of its currency.
• C) fix its domestic interest rates in order to maintain the convertibility of its currency.
• D) raise taxes in order to maintain the convertibility of its currency.

Understand the concept and significance of Net Present Value (NPV) in evaluating capital investments.

Be able to calculate the Net Present Value of various investment proposals using present value factors.

Comprehend the concept of the time value of money and its importance in capital budgeting decisions.

Understand how to determine and interpret the internal rate of return (IRR) for an investment.