Countries A and B have exports of $2 billion and $6 billion, respectively. The total interest and

Question:

Countries A and B have exports of $2 billion and $6 billion, respectively. The total interest and amortization on foreign loans for both countries are $1 billion and $2 billion, respectively.
a. What is the debt service ratio (DSR) for each country?
b. Based only on this ratio, to which country should lenders charge a higher risk premium?
c. What are the shortcomings of using only these ratios to determine your answer in part (b)?