a. The total amount of money raised by government directly or through any of the authorised agencies is known as public debt. The money could be raised within the domestic economy or externally from citizens and or foreigners.

You are required to identify and explain FIVE general reasons for borrowing. (5 Marks)

b. In order to improve the road network for the citizens of the state government, Arewa State Government is planning to construct a road network that will cover twenty-three villages within the state using two methods of constructions as follows:

Method A: Initial cost of capital = N1,500,000,000 Cost of maintenance for every 4 years = N300,000,000

Method B: Initial Cost of capital = N1,250,000,000 Cost of maintenance for every 3 years = N150,000,000

Additional information: It is expected that the road would have maximum life span of 28 years if properly maintained.

Required: Determine the cost effectiveness on each method given that the rate of interest is 10%. (10 Marks)