What Would Happen If a Country Defaulted on Its Sovereign

question 149

Multiple Choice

What would happen if a country defaulted on its sovereign debt?

• A) It could lead to a deep recession-the effects of which might spill over into other countries.
• B) It is impossible for a country to default on its debt.
• C) Nothing,because other countries would step in to rescue the country.
• D) The country and all its property would be sold in the international marketplace to the highest bidder in an effort to repay creditors.
• E) All the assets of the country's citizens would be confiscated and sold to repay creditors.

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Definitions:

Note Receivable

A written promise that a customer will pay a fixed amount of money with interest by a certain date.

Interest

The charge for borrowing money or the compensation for lending money, typically calculated as a percentage of the principal amount.

Note Receivable

A promissory note held by the lender, stating the money due to be paid back by the debtor.

Maturity

Maturity in finance refers to the date on which the principal or final payment of a loan, bond, or other financial instrument is due to be paid in full.