Question 1

The Euromoney Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR.

Accepted Answer

A) True 
 B)False

Question 2

Debt moratorium refers to a:

Accepted Answer

A)  clause that allows the lender to call in the debt during a particular period. 
B)  delay in repaying interest and/or principal on debt. 
C)  clause that allows the lender to charge higher interest if debt is not repaid in time. 
D)  clause that allows the borrower to repay debt early. 
A)  clause that allows the lender to call in the debt during a particular period. 
B)  delay in repaying interest and/or principal on debt. 
C)  clause that allows the lender to charge higher interest if debt is not repaid in time. 
D)  clause that allows the borrower to repay debt early.

Question 3

Which of the following statements is true?

Accepted Answer

A)  There should be a positive relationship between domestic money supply growth and the probability of rescheduling. 
B)  There should be a negative relationship between domestic money supply growth and the probability of rescheduling. 
C)  There should be no relationship between domestic money supply growth and the probability of rescheduling. 
D)  The relationship between domestic money supply growth and the probability of rescheduling depends on a set of variables relating to the borrowing country. 
A)  There should be a positive relationship between domestic money supply growth and the probability of rescheduling. 
B)  There should be a negative relationship between domestic money supply growth and the probability of rescheduling. 
C)  There should be no relationship between domestic money supply growth and the probability of rescheduling. 
D)  The relationship between domestic money supply growth and the probability of rescheduling depends on a set of variables relating to the borrowing country.

Question 4

Debt-for-equity swaps provide:

Accepted Answer

A)  advantages to the less-developed country (LD
C)  in that they gain new debt in exchange for equity. 
B)  advantages to LDCs as they are able to acquire hard currency debt for local currency equity. 
C)  disadvantages to the LDC as they are able to retire expensive hard currency debt for local currency equity. 
D)  advantages to LDCs as they are able to retire expensive hard currency debt for local currency equity. 
A)  advantages to the less-developed country (LD
C)  in that they gain new debt in exchange for equity. 
B)  advantages to LDCs as they are able to acquire hard currency debt for local currency equity. 
C)  disadvantages to the LDC as they are able to retire expensive hard currency debt for local currency equity. 
D)  advantages to LDCs as they are able to retire expensive hard currency debt for local currency equity.

Question 5

Which of the following statements is true?

Accepted Answer

A)  A lender wishing to provide funds to a borrower residing in a foreign country only needs to consider the credit quality of the borrower. 
B)  A lender wishing to provide funds to a borrower residing in a foreign country only needs to consider the sovereign risk quality of the country in which the borrower resides. 
C)  A lender wishing to provide funds to a borrower residing in a foreign country should consider either the credit quality of the borrower or the sovereign risk quality of the country in which the borrower resides. 
D)  A lender wishing to provide funds to a borrower residing in a foreign country should consider both the credit quality of the borrower and the sovereign risk quality of the country in which the borrower resides. 
A)  A lender wishing to provide funds to a borrower residing in a foreign country only needs to consider the credit quality of the borrower. 
B)  A lender wishing to provide funds to a borrower residing in a foreign country only needs to consider the sovereign risk quality of the country in which the borrower resides. 
C)  A lender wishing to provide funds to a borrower residing in a foreign country should consider either the credit quality of the borrower or the sovereign risk quality of the country in which the borrower resides. 
D)  A lender wishing to provide funds to a borrower residing in a foreign country should consider both the credit quality of the borrower and the sovereign risk quality of the country in which the borrower resides.

Question 6

Which of the following are reasons why debt rescheduling is more likely than debt repudiation?

Accepted Answer

A)  There are fewer FIs in any international lending syndicate compared to the number of bondholders. 
B)  Many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling. 
C)  There are more FIs in any international lending syndicate compared to the number of bondholders. 
D)  There are fewer FIs in any international lending syndicate compared to the number of bondholders and many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling only. 
A)  There are fewer FIs in any international lending syndicate compared to the number of bondholders. 
B)  Many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling. 
C)  There are more FIs in any international lending syndicate compared to the number of bondholders. 
D)  There are fewer FIs in any international lending syndicate compared to the number of bondholders and many international loan syndicates comprise the same groups of FIs, increasing the probability of consensus in case of rescheduling only.

Question 7

Debt repudiations were more common before WWII compared to now.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following are potential problems associated with using credit scoring as a tool for assessing country risk?

Accepted Answer

A)  Measurement of key variables. 
B)  Political risk factors and incentive aspects. 
C)  Political risk factors and portfolio aspects. 
D)  Measurement of key variables, political risk factors, portfolio aspects and incentive aspects. 
A)  Measurement of key variables. 
B)  Political risk factors and incentive aspects. 
C)  Political risk factors and portfolio aspects. 
D)  Measurement of key variables, political risk factors, portfolio aspects and incentive aspects.

Question 9

Which of the following expressions truly represents the calculation of a country's debt service ratio?

Accepted Answer

A)  (Interest plus amortisation) divided by exports. 
B)  (Interest plus amortisation) divided by imports. 
C)  (Interest plus amortisation) divided by foreign debt. 
D)  (Interest plus amortisation) divided by GDP. 
A)  (Interest plus amortisation) divided by exports. 
B)  (Interest plus amortisation) divided by imports. 
C)  (Interest plus amortisation) divided by foreign debt. 
D)  (Interest plus amortisation) divided by GDP.

Question 10

Which of the following statements is true in relation to the economic freedom index?

Accepted Answer

A)  The economic freedom index includes measures such as prosperity rights regulation, capital flows and black market activities. 
B)  The economic freedom index measures a country's economic freedom on a scale of 1 to 5, whereby a scale of 5 implies policies most conducive to economic freedom, while a score of 1 implies the least conducive to economic freedom. 
C)  The economic freedom index measures a country's economic freedom on a scale of 1 to 10, whereby a scale of 1 implies policies most conducive to economic freedom, while a score of 10 implies the least conducive to economic freedom. 
D)  The economic freedom index does not exist. 
A)  The economic freedom index includes measures such as prosperity rights regulation, capital flows and black market activities. 
B)  The economic freedom index measures a country's economic freedom on a scale of 1 to 5, whereby a scale of 5 implies policies most conducive to economic freedom, while a score of 1 implies the least conducive to economic freedom. 
C)  The economic freedom index measures a country's economic freedom on a scale of 1 to 10, whereby a scale of 1 implies policies most conducive to economic freedom, while a score of 10 implies the least conducive to economic freedom. 
D)  The economic freedom index does not exist.

Question 11

HIPC stands for:

Accepted Answer

A)  heavily import-focused poor countries. 
B)  heavily indebted poorest countries. 
C)  highly indebted productive countries. 
D)  heavily import-focused productive countries. 
A)  heavily import-focused poor countries. 
B)  heavily indebted poorest countries. 
C)  highly indebted productive countries. 
D)  heavily import-focused productive countries.

Question 12

Explain the relationships between a country's probability of rescheduling and the country's:
a) domestic money supply growth
b) debt service ratio
c) investment ratio
d) variance of export revenue

Accepted Answer

a) Rapid domestic money supply growth in

Question 13

What does MYRA refer to?

Accepted Answer

A)  multi-year repayment agreement 
B)  multi-year refinancing agreement 
C)  multi-year renegotiating agreement 
D)  multi-year restructuring agreement 
A)  multi-year repayment agreement 
B)  multi-year refinancing agreement 
C)  multi-year renegotiating agreement 
D)  multi-year restructuring agreement

Question 14

Which of the following is true of Brady bonds?

Accepted Answer

A)  They are uncollateralised. 
B)  They have a shorter maturity and a higher than promised coupon (yield) than the original sovereign loans. 
C)  The benefit from Brady bond is the 'saving' from lower interest spreads required on such bonds. 
D)  Their value partly reflects the value of collateral underlying the principal and/or interest on the issue. 
A)  They are uncollateralised. 
B)  They have a shorter maturity and a higher than promised coupon (yield) than the original sovereign loans. 
C)  The benefit from Brady bond is the 'saving' from lower interest spreads required on such bonds. 
D)  Their value partly reflects the value of collateral underlying the principal and/or interest on the issue.

Question 15

Changing the contractual terms of a loan, such as its maturity and interest payments is referred to as:

Accepted Answer

A)  debt repudiation. 
B)  debt rescheduling. 
C)  refinancing. 
D)  reinvesting. 
A)  debt repudiation. 
B)  debt rescheduling. 
C)  refinancing. 
D)  reinvesting.

Question 16

Which of the following statements is true?

Accepted Answer

A)  There should be a positive relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
B)  There should be a negative relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
C)  There should be no relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
D)  The relationship between the size of a country's variance of export revenue and the probability of rescheduling depends on a set of variables relating to the borrowing country. 
A)  There should be a positive relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
B)  There should be a negative relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
C)  There should be no relationship between the size of a country's variance of export revenue and the probability of rescheduling. 
D)  The relationship between the size of a country's variance of export revenue and the probability of rescheduling depends on a set of variables relating to the borrowing country.

Question 17

All of the following are relevant determinants of sovereign risk exposure: the rate of domestic money supply growth; the variance of export revenue, and the size of the population.

Accepted Answer

A) True 
 B)False

Question 18

Debt rescheduling is the least common form of sovereign risk event.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true?

Accepted Answer

A)  The reason why debt rescheduling was more common than debt repudiation before WWII is because back then, international debt had predominantly taken the form of foreign bonds, while today it predominantly takes the form of bank loans. 
B)  The reason why debt rescheduling was more common than debt repudiation before WWII is because back then, international debt had predominantly taken the form of bank loans, while today it predominantly takes the form of foreign bonds. 
C)  The reason why debt repudiation was more common than debt rescheduling before WWII is because back then, international debt had predominantly taken the form of bank loans, while today it predominantly takes the form of foreign bonds. 
D)  The reason why debt repudiation was more common than debt rescheduling before WWII is because back then, international debt had predominantly taken the form of foreign bonds, while today it predominantly takes the form of bank loans. 
A)  The reason why debt rescheduling was more common than debt repudiation before WWII is because back then, international debt had predominantly taken the form of foreign bonds, while today it predominantly takes the form of bank loans. 
B)  The reason why debt rescheduling was more common than debt repudiation before WWII is because back then, international debt had predominantly taken the form of bank loans, while today it predominantly takes the form of foreign bonds. 
C)  The reason why debt repudiation was more common than debt rescheduling before WWII is because back then, international debt had predominantly taken the form of bank loans, while today it predominantly takes the form of foreign bonds. 
D)  The reason why debt repudiation was more common than debt rescheduling before WWII is because back then, international debt had predominantly taken the form of foreign bonds, while today it predominantly takes the form of bank loans.

Question 20

Which of the following statements is true?

Accepted Answer

A)  Debt-for-equity swap programs appear to enhance LCD debt prices. 
B)  Debt-for-equity swap programs appear to have no impact on LCD debt prices. 
C)  Debt-for-equity swap programs appear to depress LCD debt prices. 
D)  Debt-for-equity swaps are not available for traded LCD debt. 
A)  Debt-for-equity swap programs appear to enhance LCD debt prices. 
B)  Debt-for-equity swap programs appear to have no impact on LCD debt prices. 
C)  Debt-for-equity swap programs appear to depress LCD debt prices. 
D)  Debt-for-equity swaps are not available for traded LCD debt.

The Euromoney Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR.

Debt moratorium refers to a:

Which of the following statements is true?

Debt-for-equity swaps provide:

Which of the following statements is true?

Which of the following are reasons why debt rescheduling is more likely than debt repudiation?

Debt repudiations were more common before WWII compared to now.

Which of the following are potential problems associated with using credit scoring as a tool for assessing country risk?

Which of the following expressions truly represents the calculation of a country's debt service ratio?

Which of the following statements is true in relation to the economic freedom index?

HIPC stands for:

Explain the relationships between a country's probability of rescheduling and the country's: a) domestic money supply growth b) debt service ratio c) investment ratio d) variance of export revenue

What does MYRA refer to?

Which of the following is true of Brady bonds?

Changing the contractual terms of a loan, such as its maturity and interest payments is referred to as:

Which of the following statements is true?

All of the following are relevant determinants of sovereign risk exposure: the rate of domestic money supply growth; the variance of export revenue, and the size of the population.

Debt rescheduling is the least common form of sovereign risk event.

Which of the following statements is true?

Which of the following statements is true?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 12: Sovereign Risk

The Euromoney Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR.

Debt moratorium refers to a:

Which of the following statements is true?

Debt-for-equity swaps provide:

Which of the following statements is true?

Which of the following are reasons why debt rescheduling is more likely than debt repudiation?

Debt repudiations were more common before WWII compared to now.

Which of the following are potential problems associated with using credit scoring as a tool for assessing country risk?

Which of the following expressions truly represents the calculation of a country's debt service ratio?

Which of the following statements is true in relation to the economic freedom index?

HIPC stands for:

Explain the relationships between a country's probability of rescheduling and the country's: a) domestic money supply growth b) debt service ratio c) investment ratio d) variance of export revenue

What does MYRA refer to?

Which of the following is true of Brady bonds?

Changing the contractual terms of a loan, such as its maturity and interest payments is referred to as:

Which of the following statements is true?

All of the following are relevant determinants of sovereign risk exposure: the rate of domestic money supply growth; the variance of export revenue, and the size of the population.

Debt rescheduling is the least common form of sovereign risk event.

Which of the following statements is true?

Which of the following statements is true?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters