If Two Countries Are Identical in All Respects Except That

If two countries are identical in all respects except that country A's debt service ratio is 1.5, country B's debt service ratio is 1.25, country A's import ratio is 0.75, and country B's import ratio is 0.90, which country poses the least sovereign country risk?

A) Country A, because the higher debt service ratio's negative impact on the country's risk exposure outweighs the impact of the lower import ratio effect.
B) Country B, because the higher debt service ratio's negative impact on the country's risk exposure outweighs the impact of the lower import ratio effect.
C) Country A, because the higher debt service ratio's positive impact on the country's risk exposure outweighs the impact of the lower import ratio effect.
D) Country B, because the lower debt service ratio's impact outweighs the higher import ratio's impact on the country risk exposure.
E) They both have the same sovereign country risk exposure.

Correct Answer:

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