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# Standard & Poor's sovereign nation debt ratings reflect the opinions o

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Re: Standard & Poor's sovereign nation debt ratings reflect the opinions o [#permalink]
Can anyone explain questions 1 and 2?
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Re: Standard & Poor's sovereign nation debt ratings reflect the opinions o [#permalink]
PrachiMaloo wrote:
Can anyone explain questions 1 and 2?

Can you share your thoughts on both of these questions? Question #1 is very easy and straighforward.
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Re: Standard & Poor's sovereign nation debt ratings reflect the opinions o [#permalink]
Anshuman0902 wrote:
hey ! could you please provide OE for question no. 3

Explanation

3. The author includes the sentence about "government controlled factors" (Highlighted) most probably in order to

Difficulty Level: 700

Explanation

No OE is available, let me try to explain.

One need to read and understand the second paragraph completely to get the last question correct. The second paragraph explains how the rating works.

They reflect only the credit risk of national governments, not private issuers within the rated country. Consequently, although government-controlled factors, such as the exchange rate or industry regulations, do undoubtedly affect the private sector operating and financial environment, sovereign nation ratings do not speak to these factors specifically. But because private markets operate on fear, instinct, and panic as much as on logic, they do unfortunately react to nation debt ratings.

Now try to eliminate the answer choice until we remain with one. Keep in mind the highlighted text.

A. relate the history of sovereign nation debt ratings.

No history has been discussed. Easy elimination.

B. discuss the effects of exchange rates on the private sector.

First, the exchange rate is not the only factor which effects the private sector as there are other factors too, second the highlighted text didn't written as such to stress on only the exchange rate.

C. show how government regulation hurts business.

This is a trap answer, by reading the passage we cannot infer or conclude that government regulations are hurting business, the word effect and hurt are two very different words and the word hurt is to too extreme to conclude.

D. contradict the idea that ratings show only governments' credit risk.

This is again a trap choice, author tries to convey multiple times that ratings only shows government credit risk. See the bold lines in the above given text in the passage. This is opposite option.

E. stress that ratings do not reflect private sector data, despite market reaction.

This option is correct, see the quotes lines and the bold text in them above.