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

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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 (b)?

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Financial Institutions Management A Risk Management Approach

ISBN: 9780073530758

7th Edition

Authors: Anthony Saunders, Marcia Cornett

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

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Financial Institutions Management A Risk Management Approach

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