Question 1

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.

Question 2

Which of the following statements is true in relation to secondary markets for LDC debt?

Accepted Answer

A) LDC loans change hands when one creditor assigns the rights to all future payments and principal payments to a buyer, hence removing it from the balance sheet. 
B) Liquidity in these markets is low, as the country whose debt is traded needs to consent to the transaction. 
C) Prices for LCD debt are negotiated directly between the purchaser and the seller. 
D) LDC loans change hands when one creditor assigns the rights to all future payments and principal payments to a buyer and prices for LCD debt are negotiated directly between the purchaser and the seller. 
A) LDC loans change hands when one creditor assigns the rights to all future payments and principal payments to a buyer, hence removing it from the balance sheet. 
B) Liquidity in these markets is low, as the country whose debt is traded needs to consent to the transaction. 
C) Prices for LCD debt are negotiated directly between the purchaser and the seller. 
D) LDC loans change hands when one creditor assigns the rights to all future payments and principal payments to a buyer and prices for LCD debt are negotiated directly between the purchaser and the seller.

Question 3

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

Accepted Answer

A) The Euromoney Index rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B) The Euromoney Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR, adjusted for the volume and maturity of the issue. 
C) The Euromoney 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 Euromoney Index rates country risk by combined economic and political risk on a maximum of 100 points scale. 
B) The Euromoney Index is based on the spread in the Euromarket of the required interest rate on a country's debt over the LIBOR, adjusted for the volume and maturity of the issue. 
C) The Euromoney 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 4

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 5

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 6

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 7

Which of the following statements is true?

Accepted Answer

A) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on economic ratios for each country. 
B) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on political ratios for each country. 
C) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on industry performance ratios for each country. 
D) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on financial performance ratios for each country. 
A) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on economic ratios for each country. 
B) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on political ratios for each country. 
C) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on industry performance ratios for each country. 
D) The most common approach to evaluating country risk among large FIs is to develop sovereign country risk scoring models based on financial performance ratios for each country.

Question 8

Which of the following is not a country risk assessment service available to outside investors?

Accepted Answer

A) The Euromoney Index. 
B) The Economist Intelligence Unit. 
C) The Sovereign Risk Index. 
D) The Institutional Investor Index. 
A) The Euromoney Index. 
B) The Economist Intelligence Unit. 
C) The Sovereign Risk Index. 
D) The Institutional Investor Index.

Question 9

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 10

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 11

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 12

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 13

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 14

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 15

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 16

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 17

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 18

Both buyers and sellers of LDC debt seem willing to participate in the LDC debt markets for the purpose of rebalancing the country risk exposure on their balance sheets.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Which of the following statements is true?

Accepted Answer

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

Which of the following statements is true?

Which of the following statements is true in relation to secondary markets for LDC debt?

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

Which of the following statements is true?

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

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

Which of the following statements is true?

Which of the following is not a country risk assessment service available to outside investors?

Which of the following statements is true?

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

Which of the following statements is true?

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

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 are reasons why debt rescheduling is more likely than debt repudiation?

Which of the following statements is true?

Which of the following is true of Brady bonds?

Both buyers and sellers of LDC debt seem willing to participate in the LDC debt markets for the purpose of rebalancing the country risk exposure on their balance sheets.

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

Which of the following statements is true in relation to secondary markets for LDC debt?

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

Which of the following statements is true?

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

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

Which of the following statements is true?

Which of the following is not a country risk assessment service available to outside investors?

Which of the following statements is true?

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

Which of the following statements is true?

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

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 are reasons why debt rescheduling is more likely than debt repudiation?

Which of the following statements is true?

Which of the following is true of Brady bonds?

Both buyers and sellers of LDC debt seem willing to participate in the LDC debt markets for the purpose of rebalancing the country risk exposure on their balance sheets.

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