A Possible Reason for the High Systematic Risk of Debt

question 46

Multiple Choice

A possible reason for the high systematic risk of debt service ratio (DSR) is the:

• A)tendency of world commodity prices to reflect non-similar economic conditions
• B)sensitivity of this ratio to rising nominal and real interest rates in the developed countries
• C)tendency of prices and world demands for commodities to reflect simultaneously economic conditions
• D)discretionary nature of money supply growth for LDC governments

---

Definitions:

Competition

The competition between sellers aiming to enhance their profits, gain a larger share of the market, and boost their sales figures by adjusting different components of the marketing mix.

Expected Rate Of Return

The anticipated profit or loss from an investment, considering both the risk and the return.

Normal Rate Of Return

The average or expected return on investment in a normal market condition, often considered the minimum acceptable compensation for investment risk.

Depreciating Capital

Assets that lose value over time due to wear and tear or obsolescence.