ikoreaii

Which of the following factors used to assess municipal tax-backed debt analyzes the issuer’s ability to manage general operating funds?

A) Issuer's debt structure.

B) Budgetary policy.

C) Local tax and intergovernmental revenue availability.

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The analysis of budgetary policy entails the assessment of the issuer’s ability to manage general operating funds.

ikoreaii

Each of the following factors are employed in the assessment of "tax-backed" municipal bonds EXCEPT:

A) Credit quality of the collateral.

B) Issuer's debt structure.

C) Local tax availability.

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There is typically no collateral pledged to a general obligation municipal bond.

ikoreaii

Which of the following statements regarding the comparison of "general obligation" and "revenue" municipal bonds is least accurate?

A) Revenue bonds are backed by the full faith and credit of the issuing municipality.

B) Revenue bonds must be evaluated with respect to their covenants such that revenues from the project are not redirected toward other uses within the community.

C) General obligation bonds must be evaluated with respect to the issuer's existing debt structure and the ability of the local government to generate the requisite level of taxes to repay the debt.

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The cash flows (revenue) from the project that the revenue bond funded are used to service the bond.

ikoreaii

What is the key difference between a local currency debt rating and a foreign currency debt rating?

A) A foreign currency debt rating relies on the country's ability to generate appropriate foreign currency cash flows via its trade flows.

B) Local currency debt ratings are uncorrelated with the country's foreign currency debt ratings.

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.

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A foreign currency debt rating relies on the country's ability to generate appropriate foreign currency cash flows via its trade flows.

ikoreaii

Which of the following is least likely a factor used by Standard & Poor’s rating agency to assess the creditworthiness of a government’s foreign currency debt?

A) Income and economic structure.

B) Net public debt.

C) Country's balance of payments.

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For foreign currency debt, Standard & Poor analyzes a country’s balance of payments, net public debt, total net external debt and net external liabilities.

ikoreaii

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) The two general categories used by Standard & Poor’s in deriving sovereign ratings are economic risk and political risk.

C) There is a local currency rating and a foreign currency rating assigned to each national government.

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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.

ikoreaii

Which of the following is the primary concern of a rating agency when rating the foreign currency debt of a sovereign nation?

A) The government debt burden and debt service experience.

B) Political stability and the extent of the participation of the populace in the political process.

C) The country's balance of payments and its ability to generate the appropriate foreign currency cash flows.

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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.

ikoreaii

Each of the following factors is analyzed relative to a country's willingness to repay its sovereign debt EXCEPT:

A) internal security risks.

B) the degree of economic and industrial diversification.

C) the participation of the population in the political process.

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The degree of economic and industrial diversification deals with the ability, not willingness, of a country to repay its sovereign debt.

ikoreaii

Which of the following is a component of political risk?

A) The existence of either a market or non-market economy.

B) Integration in global trade and financial system.

C) Governmental operating and budget balances.

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Political risk is the assessment of the form of government, extent of popular participation, orderliness of leadership succession, degree of consensus on economic policy objectives, integration in global trade and financial systems, and internal and external security risks.

ikoreaii

Political risk is best described as:

A) an assessment of the willingness of a national government to satisfy its debt obligations.

B) an assessment of the ability of a national government to service its debt.

C) a quantitative evaluation of political factors that influence economic policies.

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Political risk is a qualitative issue that addresses the willingness of a national government to pay its debt obligations.