Question 1

Performing loans in the LDC debt market are loans on which the foreign country is making promised payments.

Accepted Answer

A) True 
 B)False

Question 2

Money supply growth and the import ratio tend to have low systematic risk elements in a country risk analysis (CRA).

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an attempt to measure the absence of governmental constraint on the production,consumption,and distribution of goods?

Accepted Answer

A) Euromoney Index. 
B) Index of Economic Freedom. 
C) Corruption Perceptions Index. 
D) Economist Intelligence Unit. 
A) Euromoney Index. 
B) Index of Economic Freedom. 
C) Corruption Perceptions Index. 
D) Economist Intelligence Unit.

Question 4

Under the doctrine of sovereign immunity,creditors cannot force repayment of the debt.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following are normally traded at very deep discounts from 100 percent?

Accepted Answer

A) Restructured loans. 
B) Brady bonds. 
C) Sovereign bonds. 
D) Performing loans. 
E) Nonperforming loans. 
A) Restructured loans. 
B) Brady bonds. 
C) Sovereign bonds. 
D) Performing loans. 
E) Nonperforming loans.

Question 6

The following is an example of a credit scoring model to estimate the probability of debt rescheduling for country I:

Pi = 0.25DSRi + 0.17IRi - 0.03 INVRi + 0.84VAREXi + 0.93 MGi

Where Pi is the probability of rescheduling country I's debt;DSR is the country's debt service ratio;IR is the country's import ratio;INVR is the country's investment ratio;VAREX is the country's variance of export revenue;and MG is the country's rate of growth of the domestic money supply.

According to this credit scoring model,the variable that has the highest positive impact on the probability of rescheduling is

Accepted Answer

A) debt service ratio. 
B) import ratio. 
C) investment ratio. 
D) variance of export revenue. 
E) rate of growth of the domestic money supply. 
A) debt service ratio. 
B) import ratio. 
C) investment ratio. 
D) variance of export revenue. 
E) rate of growth of the domestic money supply.

Question 7

During 2014,Argentina defaulted on government debt and also passed legislation that led to default on $30 billion of corporate debt owed to foreign creditors.

Accepted Answer

A) True 
 B)False

Question 8

The allocation of country resources between present and future consumption is measured by which of the following variables of the credit scoring model of sovereign country risk exposure?

Accepted Answer

A) The debt service ratio. 
B) The import ratio. 
C) The variance of export revenue. 
D) The investment ratio. 
A) The debt service ratio. 
B) The import ratio. 
C) The variance of export revenue. 
D) The investment ratio.

Question 9

The export revenue variance (VAREX)should be negatively related to the probability of debt rescheduling.

Accepted Answer

A) True 
 B)False

Question 10

The debt service ratio of a country should be negatively related to the probability of rescheduling.

Accepted Answer

A) True 
 B)False

Question 11

Which is NOT a key economic ratio in credit scoring models to estimate sovereign country risk exposure?

Accepted Answer

A) The debt service ratio. 
B) The import ratio. 
C) The variance of export revenue. 
D) The discount on rescheduled debt. 
A) The debt service ratio. 
B) The import ratio. 
C) The variance of export revenue. 
D) The discount on rescheduled debt.

Question 12

In exchange for the loss of some present value of the interest and principal on a loan after a rescheduling,the lender avoids the permanent loss that would result from a default.

Accepted Answer

A) True 
 B)False

Question 13

In international finance,the variance of export revenue is based solely on the quantity of product available for export.

Accepted Answer

A) True 
 B)False

Question 14

The Institutional Investor Index is based on

Accepted Answer

A) spread of the required interest rate on a country's debt over LIBOR. 
B) a number of economic and political factors weighted according to their relative importance in determining country risk problems. 
C) surveys of the loan officers of major multinational banks. 
D) combined economic and political risk on a 10-point (maximum)scale. 
A) spread of the required interest rate on a country's debt over LIBOR. 
B) a number of economic and political factors weighted according to their relative importance in determining country risk problems. 
C) surveys of the loan officers of major multinational banks. 
D) combined economic and political risk on a 10-point (maximum)scale.

Performing loans in the LDC debt market are loans on which the foreign country is making promised payments.

Money supply growth and the import ratio tend to have low systematic risk elements in a country risk analysis (CRA).

Which of the following is an attempt to measure the absence of governmental constraint on the production,consumption,and distribution of goods?

Under the doctrine of sovereign immunity,creditors cannot force repayment of the debt.

Which of the following are normally traded at very deep discounts from 100 percent?

During 2014,Argentina defaulted on government debt and also passed legislation that led to default on $30 billion of corporate debt owed to foreign creditors.

The allocation of country resources between present and future consumption is measured by which of the following variables of the credit scoring model of sovereign country risk exposure?

The export revenue variance (VAREX)should be negatively related to the probability of debt rescheduling.

The debt service ratio of a country should be negatively related to the probability of rescheduling.

Which is NOT a key economic ratio in credit scoring models to estimate sovereign country risk exposure?

In exchange for the loss of some present value of the interest and principal on a loan after a rescheduling,the lender avoids the permanent loss that would result from a default.

In international finance,the variance of export revenue is based solely on the quantity of product available for export.

The Institutional Investor Index is based on

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters

Exam 14: Sovereign Risk

Performing loans in the LDC debt market are loans on which the foreign country is making promised payments.

Money supply growth and the import ratio tend to have low systematic risk elements in a country risk analysis (CRA).

Which of the following is an attempt to measure the absence of governmental constraint on the production,consumption,and distribution of goods?

Under the doctrine of sovereign immunity,creditors cannot force repayment of the debt.

Which of the following are normally traded at very deep discounts from 100 percent?

During 2014,Argentina defaulted on government debt and also passed legislation that led to default on $30 billion of corporate debt owed to foreign creditors.

The allocation of country resources between present and future consumption is measured by which of the following variables of the credit scoring model of sovereign country risk exposure?

The export revenue variance (VAREX)should be negatively related to the probability of debt rescheduling.

The debt service ratio of a country should be negatively related to the probability of rescheduling.

Which is NOT a key economic ratio in credit scoring models to estimate sovereign country risk exposure?

In exchange for the loss of some present value of the interest and principal on a loan after a rescheduling,the lender avoids the permanent loss that would result from a default.

In international finance,the variance of export revenue is based solely on the quantity of product available for export.

The Institutional Investor Index is based on

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters