Solved

The Following Is an Example of a Credit Scoring Model

Question 96

Multiple Choice

The following is an example of a credit scoring model to estimate the probability of debt rescheduling: 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 total 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.
If two countries are identical in all respects except that country A's total debt service ratio is 1.5, country B's total 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 total 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 total 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 total 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 total 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:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents