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:
Verified
Q87: The following is an example of a
Q88: Which of the following is NOT a
Q89: Which of the following makes international loan
Q90: The statistical results of the country risk
Q91: The following is an example of a
Q92: Which of the following is true of
Q93: Which of the following are normally traded
Q94: Which of the following is true of
Q95: Which of the following is an attempt
Q97: The following is an example of a
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents