Sovereign risk involves the inability of a foreign corporation to repay the principal or interest on a loan because of stipulations by the foreign government that is out of the control of the foreign corporation.

Question

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Sovereign risk is the risk of a government being unable or unwilling to meet its loan obligations, which can result in default or delay in repayment. This can be due to various factors such as political instability, currency fluctuations, economic crisis, or regulatory changes. Therefore, it is not in the control of the foreign corporation and can impact their ability to repay the loan.

Sovereign Risk Involves the Inability of a Foreign Corporation to Repay