- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 43. Fixed-Income Markets: Issuance, Trading, and Funding
- Subject 3. Sovereign Bonds, Non-Sovereign Bonds, Quasi-Government Bonds, and Supranational Bonds
CFA Practice Question
Which C is generally not used by commercial banks when they perform sovereign debt credit analysis?
B. Collateral
C. Capacity
D. Covenants
A. Character
B. Collateral
C. Capacity
D. Covenants
Correct Answer: B
Sovereigns rarely provide collateral when they borrow.
User Contributed Comments 8
| User | Comment |
|---|---|
| ssradja | Interesting. How about covenants? |
| jmcarr02 | How could a country provide collateral... lol! I imagine a banker asking for bunch of road or an administrative building. |
| CheeHong | I would imagine those are good collaterals. Just that we never knew when the national army will come storming in to seize them back again. |
| TheHTrader | What does Character stand for? |
| Sailor85 | Character is a measure of the borrower's past payment history. In consumer lending, it is normally evaluated by pulling a credit report. |
| rocyang | Poor south americans... |
| jonan203 | well, the tax payers and their future earnings are implied to be the collateral of US debt... |
| chcarnes | unsecured = no collateral! |