Question 1

The payment method that affords the exporter the greatest degree of protection is the prepayment method.

Accepted Answer

A) True 
 B)False  True

Question 2

​A ____ is a written order from the exporter instructing the importer to pay the face amount either upon presentation or at a specified future date.

Accepted Answer

A)  ​draft 
B)  ​bill of lading 
C)  ​compensation guarantee 
D)  ​letter of credit 
A)  ​draft 
B)  ​bill of lading 
C)  ​compensation guarantee 
D)  ​letter of credit A

Question 3

Which of the following is not true regarding letters of credit?

Accepted Answer

A)  A letter of credit is a written commitment by the importer's bank on the importer's behalf promising to pay the exporter when it presents documents showing that the products have been shipped. 
B)  The letters of credit used in international trade are irrevocable. 
C)  Letters of credit guarantee that the products shipped are the products purchased. 
D)  All of these are true. 
A)  A letter of credit is a written commitment by the importer's bank on the importer's behalf promising to pay the exporter when it presents documents showing that the products have been shipped. 
B)  The letters of credit used in international trade are irrevocable. 
C)  Letters of credit guarantee that the products shipped are the products purchased. 
D)  All of these are true. C

Question 4

There is an active secondary market for banker's acceptances.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a document that might be included in the documents for an international shipment under a letter of credit?

Accepted Answer

A)  an ocean bill of lading 
B)  an airway bill 
C)  a commercial invoice 
D)  a bill of lading 
E)  a barter notification
Answer Key 
A)  an ocean bill of lading 
B)  an airway bill 
C)  a commercial invoice 
D)  a bill of lading 
E)  a barter notification
Answer Key

Question 6

The ____ was established in 1934 with the intention to facilitate Soviet-American trade.

Accepted Answer

A)  Domestic International Sales Corporation (DIS
C)  
B)  Private Export Funding Corporation (PEFCO) 
C)  Export-Import Bank 
D)  Foreign Credit Insurance Association (FCI
A)  
A)  Domestic International Sales Corporation (DIS
C)  
B)  Private Export Funding Corporation (PEFCO) 
C)  Export-Import Bank 
D)  Foreign Credit Insurance Association (FCI
A)

Question 7

​Consider a bank that acknowledges that it will make payment on behalf of a computer importer after the bank receives documents showing that the computers have been shipped to the importer. This reflects:

Accepted Answer

A)  ​accounts receivable financing. 
B)  ​forfaiting. 
C)  ​factoring. 
D)  ​a letter of credit. 
A)  ​accounts receivable financing. 
B)  ​forfaiting. 
C)  ​factoring. 
D)  ​a letter of credit.

Question 8

As part of the Ex-Im Bank's export credit insurance programs, a(n) ____ Policy is generally issued to an administrator, such as a bank, trading company, insurance broker, or government agency, which then administers the policy for multiple exporters.

Accepted Answer

A)  Multi-Buyer 
B)  Single-Buyer 
C)  Small Business 
D)  Umbrella 
A)  Multi-Buyer 
B)  Single-Buyer 
C)  Small Business 
D)  Umbrella

Question 9

The all-in rate a bank charges for a banker's acceptance includes both the interest rate and the acceptance commission.

Accepted Answer

A) True 
 B)False

Question 10

A bank will be willing to create a letter of credit on behalf of an importer only if it trusts the importer's creditworthiness.

Accepted Answer

A) True 
 B)False

Question 11

With ____, the importer's bank promises to pay the exporter if the importer fails to pay as agreed.

Accepted Answer

A)  a standby letter of credit 
B)  a bill of exchange 
C)  forfaiting 
D)  accounts receivable financing 
A)  a standby letter of credit 
B)  a bill of exchange 
C)  forfaiting 
D)  accounts receivable financing

Question 12

Under prepayment, the exporter will not ship the products until the exporter has received payment from the importer.

Accepted Answer

A) True 
 B)False

Question 13

When an exporter sells an account receivable to a factor, the factor will attempt to collect payment from the importer, but if the importer is unable to pay, the factor can collect the payment from the exporter.

Accepted Answer

A) True 
 B)False

Question 14

Under a letter of credit (L/C) arrangement, the _____ issues the L/C and sends it to the ____.

Accepted Answer

A)  importer's government; exporter's government 
B)  importer's bank; exporter's bank 
C)  exporter's government; importer's government 
D)  exporter's bank; exporter's government 
A)  importer's government; exporter's government 
B)  importer's bank; exporter's bank 
C)  exporter's government; importer's government 
D)  exporter's bank; exporter's government

Question 15

The commission earned by the bank for creating a banker's acceptance is reflected in the all-in rate.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a program of the Export-Import Bank of the United States?

Accepted Answer

A)  Working Capital Loan Guarantee Program 
B)  Project Finance Loan Program 
C)  Direct Loan Program 
D)  Foreign Sales Corporation Program 
A)  Working Capital Loan Guarantee Program 
B)  Project Finance Loan Program 
C)  Direct Loan Program 
D)  Foreign Sales Corporation Program

Question 17

​The risk to the exporter is highest with the ____ payment method.

Accepted Answer

A)  ​prepayment 
B)  ​letter of credit 
C)  ​sight draft 
D)  ​open account 
A)  ​prepayment 
B)  ​letter of credit 
C)  ​sight draft 
D)  ​open account

Question 18

Who is obligated to make payment once proof of shipment of goods is documented in a letter of credit?

Accepted Answer

A)  the exporter 
B)  the importer 
C)  the importer's bank 
D)  the importer's government 
A)  the exporter 
B)  the importer 
C)  the importer's bank 
D)  the importer's government

Question 19

Under a countertrade arrangement, the exporter ships the products to the importer while retaining title to the merchandise until it is sold.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a payment method used for international trade?

Accepted Answer

A)  consignment 
B)  open account 
C)  factoring 
D)  draft 
E)  letter of credit 
A)  consignment 
B)  open account 
C)  factoring 
D)  draft 
E)  letter of credit

Exam 19: Financing International Trade

The payment method that affords the exporter the greatest degree of protection is the prepayment method.

​A ____ is a written order from the exporter instructing the importer to pay the face amount either upon presentation or at a specified future date.

Which of the following is not true regarding letters of credit?

There is an active secondary market for banker's acceptances.

Which of the following is not a document that might be included in the documents for an international shipment under a letter of credit?

The ____ was established in 1934 with the intention to facilitate Soviet-American trade.

​Consider a bank that acknowledges that it will make payment on behalf of a computer importer after the bank receives documents showing that the computers have been shipped to the importer. This reflects:

As part of the Ex-Im Bank's export credit insurance programs, a(n) ____ Policy is generally issued to an administrator, such as a bank, trading company, insurance broker, or government agency, which then administers the policy for multiple exporters.

The all-in rate a bank charges for a banker's acceptance includes both the interest rate and the acceptance commission.

A bank will be willing to create a letter of credit on behalf of an importer only if it trusts the importer's creditworthiness.

With ____, the importer's bank promises to pay the exporter if the importer fails to pay as agreed.

Under prepayment, the exporter will not ship the products until the exporter has received payment from the importer.

When an exporter sells an account receivable to a factor, the factor will attempt to collect payment from the importer, but if the importer is unable to pay, the factor can collect the payment from the exporter.

Under a letter of credit (L/C) arrangement, the _____ issues the L/C and sends it to the ____.

The commission earned by the bank for creating a banker's acceptance is reflected in the all-in rate.

Which of the following is not a program of the Export-Import Bank of the United States?

​The risk to the exporter is highest with the ____ payment method.

Who is obligated to make payment once proof of shipment of goods is documented in a letter of credit?

Under a countertrade arrangement, the exporter ships the products to the importer while retaining title to the merchandise until it is sold.

Which of the following is not a payment method used for international trade?

Multinational Financial Management: an Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Short-Term Financing

International Cash Management

Filters

A ____ is a written order from the exporter instructing the importer to pay the face amount either upon presentation or at a specified future date.

Consider a bank that acknowledges that it will make payment on behalf of a computer importer after the bank receives documents showing that the computers have been shipped to the importer. This reflects:

Under a letter of credit (L/C) arrangement, the _ issues the L/C and sends it to the .

The risk to the exporter is highest with the ____ payment method.