aianjie

 

2、Which of the following would be considered a sovereign risk?

A) An international firm refuses to make any further debt repayments to outside creditors.

B) An international firm refuses to allow legal remedies to be offset in the international bankruptcy courts.

C) A foreign country assesses a domestic bank and refuses to allow a firm in their country to borrow from the domestic bank.

D) A foreign country refuses to allow any further debt repayment to be made to outside creditors.

aianjie

 

The correct answer is D

Sovereign risk is the risk of a foreign government limiting or preventing domestic borrowers from repaying debt; it is independent of the credit quality of an individual borrower. An international bankruptcy court doesn’t exist.

aianjie

 

3、Cross-default provisions:

A) allow a foreign country to obtain special default treatment from bond underwriters.

B) prevent a country from choosing a group of weak lenders for special default treatment.

C) state that a foreign firm cannot elect to default on an outstanding loan when the sovereign country has defaulted.

D) prevent a country from choosing to default to domestic lenders.