Sovereign risk refers to the risk that a sovereign country may default on its foreign obligations or fail to honor guarantees of private borrowings, not necessarily due to bankruptcy but due to unwillingness or inability to pay.

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Sovereign Risk Is

Question 39

Multiple Choice

Sovereign risk is:

A) the possibility that political factors may impair a borrower's ability to meet debt-servicing obligations.
B) the risk resulting from changes in foreign exchange values that affect the return on loans or investments denominated in other currencies.
C) the possibility that a sovereign country as a borrower may become unable or unwilling to service its foreign obligations or meet guarantees of nongovernmental or private borrowings.
D) the possibility that a sovereign country as a borrower may become bankrupt.

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