Which of the following is not an example of sovereign risk? a. Changes in tax rates b. Changes in currency denominations c. Changes in exchange rates d. Changes in regulations
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- What risk is due to changes in the level of interest rate in the economy and may affect industries at the same time? a.systematic risk b. inflation rate risk c.foreign exchange rate risk d.interest rate riskWhich of the following is not an example of sovereign risk? a.Changes in tax rates b.Changes in currency denominations c.Changes in exchange rates d.Changes in regulationsThe deterioration of economic conditions; deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks; market crisis are examples of what kinds of risk? Select one: a. Solvency risk b. Foreign exchange risk c. Sovereign risk d. Credit risk
- Which of the following factors would best justify a decision to avoid investing in a country's sovereign debt? A.Suitable checks and balances in policy making B.Freely floating currency C.A population that is shrinkingWhat is sovereign risk and what is the difference between rescheduling and repudiation? What is total debt service ratio and how is it calculated? Find the total debt service ratio of a country. See if you can also find an example of a country, or countries, that Western banks currently have exposure to.Which of the following is the risk due to exchange rates? Business risk Financial risk Market risk Interest rate risk Purchasing power risk Exchange rate risk
- Which hedging strategy uses an exchange rate agreed to today for future delivery of currency to minimize the financial institution’s risk exposure? a. Hedging with forwards. b. On balance sheet hedging. c. Off balance sheet hedging. d. Spot hedging.According to PFRS 7, it is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Interest rate risk Currency risk Credit risk Other price riskAnswer the following: a. Explain why the interest parity condition must hold if the foreign exchange market is in equilibrium. b. Explain why overshooting occurs. What can the Central Bank do to mitigate its effects?
- Explain how changes in interest rates are likely to affect exchange rates.Q. If barriers to international securities markets are reduced, will a country’s interest rate be more or less susceptible to foreign lending and borrowing activities? Explain.What type of banking risk includes deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks. a. Credit Risk b. Liquidity Risk c. Foreign Exchange Risk d. Interest Rate Risk
