6.Which of the following is NOT a category used by Standard & Poor’s to derive their ratings on sovereign bond issues?
A) Economic growth prospects.
B) Fiscal flexibility.
C) Price stability.
D) Capital market structure.
7.Which of the following is NOT a factor used by Standard & Poor’s rating agency to assess the creditworthiness of a government’s local currency debt?
A) The country's balance of payments.
B) The public debt burden and debt service track record.
C) Monetary policy and rate of inflation.
D) Degree of participation by the populace in the political process.
8.Which of the following is NOT a factor used by Standard & Poor’s rating agency to assess the creditworthiness of a government’s foreign currency debt?
A) Net public debt.
B) Total net external debt.
C) Income and economic structure.
D) Country's balance of payments.
9．Which of the following statements regarding sovereign bond issues is least accurate?
A) Defaults are greater on local currency issues than foreign currency issues.
B)
C) The two general categories of assessment for sovereign bond issues are political risk and economic risk.
D) There is a local currency rating and a foreign currency rating assigned to each national government.
10．Which of the following is the primary concern of a rating agency when rating the foreign currency debt of a sovereign nation?
A) The country's balance of payments and its ability to generate the appropriate foreign currency cash flows.
B) Political stability and the extent of the participation of the populace in the political process.
C) Income base and growth of the economic infrastructure.
D) The government debt burden and debt service experience.
11．What is the key difference between a local currency debt rating and a foreign currency debt rating?
A) A local currency debt rating depends critically upon the revenues generated from specific municipal projects such as airports and roads.
B) A foreign currency debt rating relies on the country's ability to generate appropriate foreign currency cash flows via its trade flows.
C) A foreign currency debt rating depends primarily upon the economic infrastructure of the economy and the level of education and living standards in the country.
D) Local currency debt ratings are uncorrelated with the country's foreign currency debt ratings.
6.Which of the following is NOT a category used by Standard & Poor’s to derive their ratings on sovereign bond issues?
A) Economic growth prospects.
B) Fiscal flexibility.
C) Price stability.
D) Capital market structure.
The correct answer was D)
The categories used to assess sovereign bond issues include: political risk, income and economic structure, economic growth prospects, fiscal flexibility, public debt burden, price stability, balance of payments flexibility, and external debt and liquidity.
7.Which of the following is NOT a factor used by Standard & Poor’s rating agency to assess the creditworthiness of a government’s local currency debt?
A) The country's balance of payments.
B) The public debt burden and debt service track record.
C) Monetary policy and rate of inflation.
D) Degree of participation by the populace in the political process.
The correct answer was A)
Standard & Poor examines any government policies that could foster or interfere with timely debt service. These factors include the stability of political institutions and degree of popular participation in the political process, income and economic structure, fiscal policy, monetary policy, inflation, public debt burden, and debt service record.
8.Which of the following is NOT a factor used by Standard & Poor’s rating agency to assess the creditworthiness of a government’s foreign currency debt?
A) Net public debt.
B) Total net external debt.
C) Income and economic structure.
D) Country's balance of payments.
The correct answer was C)
For foreign currency debt, Standard & Poor analyzes a country’s balance of payments, net public debt, total net external debt and net external liabilities.
9．Which of the following statements regarding sovereign bond issues is least accurate?
A) Defaults are greater on local currency issues than foreign currency issues.
B)
C) The two general categories of assessment for sovereign bond issues are political risk and economic risk.
D) There is a local currency rating and a foreign currency rating assigned to each national government.
The correct answer was A)
Defaults are greater on foreign currency issues because a national government has little control with respect to its exchange rate and must purchase foreign currency to repay its foreign currency obligation.
10．Which of the following is the primary concern of a rating agency when rating the foreign currency debt of a sovereign nation?
A) The country's balance of payments and its ability to generate the appropriate foreign currency cash flows.
B) Political stability and the extent of the participation of the populace in the political process.
C) Income base and growth of the economic infrastructure.
D) The government debt burden and debt service experience.
The correct answer was A)
The key to the evaluation of the foreign currency debt of the nation is the country's balance of payments and its ability to generate the appropriate foreign currency cash flows.
11．What is the key difference between a local currency debt rating and a foreign currency debt rating?
A) A local currency debt rating depends critically upon the revenues generated from specific municipal projects such as airports and roads.
B) A foreign currency debt rating relies on the country's ability to generate appropriate foreign currency cash flows via its trade flows.
C) A foreign currency debt rating depends primarily upon the economic infrastructure of the economy and the level of education and living standards in the country.
D) Local currency debt ratings are uncorrelated with the country's foreign currency debt ratings.
The correct answer was B)
A foreign currency debt rating relies on the country's ability to generate appropriate foreign currency cash flows via its trade flows.
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