QUESTION 25

When should insurance products be used in a project finance deal?

	A.	Due to the contractual structure of project finance, there's no need for insurance because risks are allocated among various parties by means of legally binding contracts.
	B.	Insurance should be used whenthe SPV's cost of risk mitigation using insurance policies is less than the premium for risk expressed in interbank interest rates requested by banks if no coverage exists.
	C.	Insurance should be used whenthe SPV's cost of risk mitigation using insurance policies is more than the premium for risk expressed in interbank interest rates requested by banks if no coverage exists.

QUESTION 26

"Investment Risk" policies:

	A.	Cover the SPV against risks of currency inconvertibility, expropriation without compensation, war and other political upheavals.
	B.	Cover the SPV against risks relating to loss of assets orfailure of the concession authority to repurchase the structure.
	C.	Consist of insurance relating to risks that can arise during transportation of pieces of parts of the project.

QUESTION 27

Which of the following is NOT a factor that derives from an integrated package for developers and lenders?

	A.	Disputes are minimized.
	B.	Ad hoc solutions can be created which would not otherwise be available.
	C.	Higher costs are incurred due to the need to come up with tailor-made solutions.

QUESTION 28

When calculating net operating cash flow (unlevered free cash flow), the following are NOT taken into account:

	A.	Changes in net working capital.
	B.	Taxes.
	C.	Debt service and dividend payments.

QUESTION 29

The pay-back period:

	A.	Is the best criterion for valuing investment projects.
	B.	Can be used as a complementary indicator to IRR.
	C.	Is meaningless when analyzing project finance deals.

QUESTION 30

With the maturity being equal, from the point of view of a bank lender the facility with a longer average life shows:

	A.	A higher level of risk.
	B.	A lower level of risk.
	C.	The same level of risk.

QUESTION 31

What condition must be respected for a project finance initiative to be financed with a given financing structure?

	A.	Operating cash flow > debt service
	B.	Operating cash flow < debt service
	C.	Operating cash flow debt service