7. Countries A and B have exports of $2 billion and $6 billion, respectively. The sum of principal repayments and interest paid on long-term debt and interest paid on short-term debt for both countries are $1 billion and $2 billion , respectively.

a. What is the total debt service ratio (TDSR) 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)?