Question 1

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

Accepted Answer

A)  Total imports divided by total exports. 
B)  Total imports divided by total foreign currency exchange reserves. 
C)  Total imports divided by total debt. 
D)  Total imports divided by GDP. 
A)  Total imports divided by total exports. 
B)  Total imports divided by total foreign currency exchange reserves. 
C)  Total imports divided by total debt. 
D)  Total imports divided by GDP.

Question 2

Sovereign risk is largely independent of the credit standing of an individual borrower operating in that country.

Accepted Answer

A) True 
 B)False

Question 3

In accordance with the Heritage Foundation, which of the following definitions best represents the term 'economic freedom'?

Accepted Answer

A)  The absence of government coercion or constraint on the production, distribution or consumption of goods and services at all costs to protect and maintain liberty itself. 
B)  The absence of government coercion or constraint on the production, distribution or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself. 
C)  The absence of government coercion or constraint on the consumption of goods and services at all costs to protect and maintain liberty itself. 
D)  The absence of government coercion or constraint on the production and distribution or consumption of goods and services at all costs to protect and maintain liberty itself. 
A)  The absence of government coercion or constraint on the production, distribution or consumption of goods and services at all costs to protect and maintain liberty itself. 
B)  The absence of government coercion or constraint on the production, distribution or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself. 
C)  The absence of government coercion or constraint on the consumption of goods and services at all costs to protect and maintain liberty itself. 
D)  The absence of government coercion or constraint on the production and distribution or consumption of goods and services at all costs to protect and maintain liberty itself.

Question 4

Which of the following is a list of countries that have followed the course of debt repudiation since WWII?

Accepted Answer

A)  China, Cuba, North Korea 
B)  Japan, South Korea, Afghanistan 
C)  Malaysia, Mexico, Chile. 
D)  Germany, Argentina, Poland 
A)  China, Cuba, North Korea 
B)  Japan, South Korea, Afghanistan 
C)  Malaysia, Mexico, Chile. 
D)  Germany, Argentina, Poland

Question 5

Which of the following countries was rated to be the riskiest according to the Institutional Investor's 2009 country credit risk ratings?

Accepted Answer

A)  Eritrea 
B)  Zimbabwe 
C)  Afghanistan 
D)  North Korea 
A)  Eritrea 
B)  Zimbabwe 
C)  Afghanistan 
D)  North Korea

Question 6

Which of the following statements is true in relation to the Institutional Investor Index?

Accepted Answer

A)  The Institutional Investor Index rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B)  The Institutional Investor Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR. 
C)  The Institutional Investor Index weighs subjective scores allocated by rating officers by the exposure of each bank to the country in question. 
D)  None of the listed options are correct. 
A)  The Institutional Investor Index rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B)  The Institutional Investor Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR. 
C)  The Institutional Investor Index weighs subjective scores allocated by rating officers by the exposure of each bank to the country in question. 
D)  None of the listed options are correct.

Question 7

The term LIBOR stands for the London Interbank:

Accepted Answer

A)  offered rate and is the rate charged on prime interbank loans on the Eurodollar market. 
B)  obligor rate and is the rate charged on prime interbank loans on the Eurodollar market. 
C)  offered rate and is the rate charged on interbank loans worldwide. 
D)  obligor rate and is the rate charged on interbank loans worldwide. 
A)  offered rate and is the rate charged on prime interbank loans on the Eurodollar market. 
B)  obligor rate and is the rate charged on prime interbank loans on the Eurodollar market. 
C)  offered rate and is the rate charged on interbank loans worldwide. 
D)  obligor rate and is the rate charged on interbank loans worldwide.

Question 8

Lenders considering lending money to a firm in another country only need to consider the firm's credit standing.

Accepted Answer

A) True 
 B)False

Question 9

What are the costs and benefits of rescheduling for the lenders and for the borrowers?

Accepted Answer

The costs and benefits of rescheduling f

Question 10

Which of the following statements is true?

Accepted Answer

A)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its debt. 
B)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its assets. 
C)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its imports. 
D)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its exports. 
A)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its debt. 
B)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its assets. 
C)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its imports. 
D)  The debt service ratio is the ratio of a country's interest and amortisation obligations to the value of its exports.

Question 11

An LDC's export revenues may be highly variable due to quantity risk and price risk.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true in relation to the Economist Intelligence Unit?

Accepted Answer

A)  The Economist Intelligence Unit rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B)  The Economist Intelligence Unit rates the risk based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR. 
C)  The Economist Intelligence Unit weighs subjective scores allocated by rating officers by the exposure of each bank to the country in question. 
D)  None of the listed options are correct. 
A)  The Economist Intelligence Unit rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B)  The Economist Intelligence Unit rates the risk based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR. 
C)  The Economist Intelligence Unit weighs subjective scores allocated by rating officers by the exposure of each bank to the country in question. 
D)  None of the listed options are correct.

Question 13

A possible reason for the high systematic risk of export revenue variance (VAREX) is the:

Accepted Answer

A)  tendency of world commodity prices to reflect non-similar economic conditions. 
B)  sensitivity of this ratio to rising nominal and real interest rates in the developed countries. 
C)  tendency of prices and world demands for commodities to reflect simultaneously economic conditions. 
D)  discretionary nature of money supply growth for LDC governments. 
A)  tendency of world commodity prices to reflect non-similar economic conditions. 
B)  sensitivity of this ratio to rising nominal and real interest rates in the developed countries. 
C)  tendency of prices and world demands for commodities to reflect simultaneously economic conditions. 
D)  discretionary nature of money supply growth for LDC governments.

Question 14

Which of the following statements is true?

Accepted Answer

A)  Governments and regulators seem to view the social costs of default on international bonds more worrisome than those on loans. 
B)  Governments and regulators seem to view the social costs of default on international bonds less worrisome than those on loans. 
C)  Governments and regulators seem to view the social costs of default on international bonds as worrisome as those on loans. 
D)  Governments and regulators have no view on the social costs of default on international bonds or loans. 
A)  Governments and regulators seem to view the social costs of default on international bonds more worrisome than those on loans. 
B)  Governments and regulators seem to view the social costs of default on international bonds less worrisome than those on loans. 
C)  Governments and regulators seem to view the social costs of default on international bonds as worrisome as those on loans. 
D)  Governments and regulators have no view on the social costs of default on international bonds or loans.

Question 15

Which of the following makes international loan rescheduling more likely than bond rescheduling?

Accepted Answer

A)  International loan contracts are not allowed to contain cross-default provisions. 
B)  Typically there are more FIs in an international lending syndicate compared to the number of potential bondholders. 
C)  Since World War II more international debt has been in the form of bonds. 
D)  An international loan syndicate typically comprises the same FIs which allows greater cohesiveness for negotiations. 
A)  International loan contracts are not allowed to contain cross-default provisions. 
B)  Typically there are more FIs in an international lending syndicate compared to the number of potential bondholders. 
C)  Since World War II more international debt has been in the form of bonds. 
D)  An international loan syndicate typically comprises the same FIs which allows greater cohesiveness for negotiations.

Question 16

An FI would be most likely to lend to a country with a:

Accepted Answer

A)  low debt service ratio. 
B)  high import ratio. 
C)  low investment ratio. 
D)  large variance of export revenue. 
A)  low debt service ratio. 
B)  high import ratio. 
C)  low investment ratio. 
D)  large variance of export revenue.

Question 17

Which of the following statements is true?

Accepted Answer

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

Question 18

Lenders may find it costly to reschedule non-accruing sovereign country debt because:

Accepted Answer

A)  it is politically embarrassing. 
B)  bankruptcy costs are high. 
C)  they might be subject to greater regulatory attention. 
D)  it is detrimental to maintaining good customer relations. 
A)  it is politically embarrassing. 
B)  bankruptcy costs are high. 
C)  they might be subject to greater regulatory attention. 
D)  it is detrimental to maintaining good customer relations.

Question 19

A possible reason for the high systematic risk of debt service ratio (DSR) is the:

Accepted Answer

A)  tendency of world commodity prices to reflect non-similar economic conditions. 
B)  sensitivity of this ratio to rising nominal and real interest rates in the developed countries. 
C)  tendency of prices and world demands for commodities to reflect simultaneously economic conditions. 
D)  discretionary nature of money supply growth for LDC governments. 
A)  tendency of world commodity prices to reflect non-similar economic conditions. 
B)  sensitivity of this ratio to rising nominal and real interest rates in the developed countries. 
C)  tendency of prices and world demands for commodities to reflect simultaneously economic conditions. 
D)  discretionary nature of money supply growth for LDC governments.

Question 20

Which of the following statements is true?

Accepted Answer

A)  The investment ratio is the ratio of a country's total investments to its GDP. 
B)  The investment ratio is the ratio of a country's real investments to its total foreign currency obligations. 
C)  The investment ratio is the ratio of a country's total investments to its imports. 
D)  None of the listed options are correct. 
A)  The investment ratio is the ratio of a country's total investments to its GDP. 
B)  The investment ratio is the ratio of a country's real investments to its total foreign currency obligations. 
C)  The investment ratio is the ratio of a country's total investments to its imports. 
D)  None of the listed options are correct.

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

Sovereign risk is largely independent of the credit standing of an individual borrower operating in that country.

In accordance with the Heritage Foundation, which of the following definitions best represents the term 'economic freedom'?

Which of the following is a list of countries that have followed the course of debt repudiation since WWII?

Which of the following countries was rated to be the riskiest according to the Institutional Investor's 2009 country credit risk ratings?

Which of the following statements is true in relation to the Institutional Investor Index?

The term LIBOR stands for the London Interbank:

Lenders considering lending money to a firm in another country only need to consider the firm's credit standing.

What are the costs and benefits of rescheduling for the lenders and for the borrowers?

Which of the following statements is true?

An LDC's export revenues may be highly variable due to quantity risk and price risk.

Which of the following statements is true in relation to the Economist Intelligence Unit?

A possible reason for the high systematic risk of export revenue variance (VAREX) is the:

Which of the following statements is true?

Which of the following makes international loan rescheduling more likely than bond rescheduling?

An FI would be most likely to lend to a country with a:

Which of the following statements is true?

Lenders may find it costly to reschedule non-accruing sovereign country debt because:

A possible reason for the high systematic risk of debt service ratio (DSR) is the:

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

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

Sovereign risk is largely independent of the credit standing of an individual borrower operating in that country.

In accordance with the Heritage Foundation, which of the following definitions best represents the term 'economic freedom'?

Which of the following is a list of countries that have followed the course of debt repudiation since WWII?

Which of the following countries was rated to be the riskiest according to the Institutional Investor's 2009 country credit risk ratings?

Which of the following statements is true in relation to the Institutional Investor Index?

The term LIBOR stands for the London Interbank:

Lenders considering lending money to a firm in another country only need to consider the firm's credit standing.

What are the costs and benefits of rescheduling for the lenders and for the borrowers?

Which of the following statements is true?

An LDC's export revenues may be highly variable due to quantity risk and price risk.

Which of the following statements is true in relation to the Economist Intelligence Unit?

A possible reason for the high systematic risk of export revenue variance (VAREX) is the:

Which of the following statements is true?

Which of the following makes international loan rescheduling more likely than bond rescheduling?

An FI would be most likely to lend to a country with a:

Which of the following statements is true?

Lenders may find it costly to reschedule non-accruing sovereign country debt because:

A possible reason for the high systematic risk of debt service ratio (DSR) is the:

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