Sovereign Risk Differs from Credit Risk Because It Is Dependent

question 32

True/False

Sovereign risk differs from credit risk because it is dependent on the financial status of the government rather than the counterparty itself.

---

Definitions:

Effective Price Ceiling

A government-imposed limit on how high the price of a product can be charged, set below the market equilibrium to be effective.

Equilibrium Price

The price at which the quantity of a good or service demanded meets the quantity supplied, resulting in a stable market condition.

Surplus

An excess of production or supply over demand, often resulting in lower prices or wasted resources.

Demand for Electronic Readers

The consumer desire or market requirement for digital devices designed for reading e-books and similar electronic documents.