Question 1

The following parties are usually guarantors in forfaiting EXCEPT:

Accepted Answer

A)  commercial banks. 
B)  government ministries of finance. 
C)  large commercial enterprises. 
D)  government banks. 
A)  commercial banks. 
B)  government ministries of finance. 
C)  large commercial enterprises. 
D)  government banks. C

Question 2

Export receivables are normally sold at a discount. The size of the discount depends on the following factors EXCEPT:

Accepted Answer

A)  overdraft fees. 
B)  collection risk. 
C)  cost of credit insurance. 
D)  size of financing and services fees. 
A)  overdraft fees. 
B)  collection risk. 
C)  cost of credit insurance. 
D)  size of financing and services fees. A

Question 3

To become a negotiable instrument, a draft must conform to the following requirements EXCEPT:

Accepted Answer

A)  it must be in writing and signed by the maker or drawer. 
B)  it must be payable to order or to bearer. 
C)  it must be written in English. 
D)  it must be payable on demand or at a fixed or determinable future date. 
A)  it must be in writing and signed by the maker or drawer. 
B)  it must be payable to order or to bearer. 
C)  it must be written in English. 
D)  it must be payable on demand or at a fixed or determinable future date. C

Question 4

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to:

Accepted Answer

A)  ship money abroad. 
B)  import agricultural products during the recession. 
C)  facilitate and stimulate foreign trade of the United States. 
D)  none of the above 
A)  ship money abroad. 
B)  import agricultural products during the recession. 
C)  facilitate and stimulate foreign trade of the United States. 
D)  none of the above

Question 5

An overdraft agreement allows a firm to overdraw its bank account up to the limit of its credit line.

Accepted Answer

A) True 
 B)False

Question 6

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

Accepted Answer

A)  the risk of noncompletion 
B)  the risk of foreign exchange risk (when combined with a various hedging techniques) 
C)  the risk that financing will not be available due to foreign exchange risk 
D)  All of these risks are reduced when using these trade implements. 
A)  the risk of noncompletion 
B)  the risk of foreign exchange risk (when combined with a various hedging techniques) 
C)  the risk that financing will not be available due to foreign exchange risk 
D)  All of these risks are reduced when using these trade implements.

Question 7

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

Accepted Answer

A)  affiliated party 
B)  unaffiliated unknown party 
C)  known unaffiliated party 
D)  domestic supplier 
A)  affiliated party 
B)  unaffiliated unknown party 
C)  known unaffiliated party 
D)  domestic supplier

Question 8

To constitute a true letter of credit transaction, the bank's commitment must be open-ended and cannot have a stated maximum amount of money.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is NOT a financial instrument that may be included in an international trade transaction?

Accepted Answer

A)  Letter of Credit 
B)  Sight Draft 
C)  Order bill of lading 
D)  Federal funds transaction 
A)  Letter of Credit 
B)  Sight Draft 
C)  Order bill of lading 
D)  Federal funds transaction

Question 10

A revocable L/C is intended to serve as a means of arranging payment but not as a guarantee of payment.

Accepted Answer

A) True 
 B)False

Question 11

Export credit insurance provides assurance to the exporter or the exporter's bank that, should the foreign customer default on payment, the insurance company will pay for a major portion of the loss.

Accepted Answer

A) True 
 B)False

Question 12

Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex.

Accepted Answer

A) True 
 B)False

Question 13

The risk of noncompletion is most important:

Accepted Answer

A)  when the international trade is recurrent in nature. 
B)  when there is a sustained relationship between the buyer and seller. 
C)  with an outstanding agreement for recurring shipments. 
D)  when the relationship is between countries whose currencies are considered strong. 
A)  when the international trade is recurrent in nature. 
B)  when there is a sustained relationship between the buyer and seller. 
C)  with an outstanding agreement for recurring shipments. 
D)  when the relationship is between countries whose currencies are considered strong.

Question 14

In a typical international trade transaction, the order of activity would be which of the following?

Accepted Answer

A)  The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The buyer's bank submits payment to the manufacturer's bank. 
B)  The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank; The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance. 
C)  The foreign buyer places an order; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank. 
D)  The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The foreign buyer places an order; The buyer's bank submits payment to the manufacturer's bank. 
A)  The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The buyer's bank submits payment to the manufacturer's bank. 
B)  The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank; The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance. 
C)  The foreign buyer places an order; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank. 
D)  The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The foreign buyer places an order; The buyer's bank submits payment to the manufacturer's bank.

Question 15

In the United States, domestic taxpayers bear the cost of export credit insurance and export financing provided by institutions like the FCIA and Eximbank to foreign buyers in order to create employment and maintain a technological edge.

Accepted Answer

A) True 
 B)False

Question 16

Why might different documentation be used for an export to a nonaffiliated foreign buyer who is a new customer, as compared with an export to a nonaffiliated foreign buyer to whom the exporter has been selling for many years?

Accepted Answer

A new nonaffiliated buyer presents a cre

Question 17

Explain what a letter of credit (L/C) is, who the principle parties are, what the principle advantage is, and how the L/C facilitates international trade.

Accepted Answer

A letter of credit (L/C) is a bank's con

Question 18

From a financial management perspective, all of the following are primary risks associated with an international trade transaction EXCEPT:

Accepted Answer

A)  currency risk. 
B)  default risk. 
C)  noncompletion risk. 
D)  interest rate risk. 
A)  currency risk. 
B)  default risk. 
C)  noncompletion risk. 
D)  interest rate risk.

Question 19

If a foreign exchange transaction calls for payment in the exporter's currency, the importer has the foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 20

Recourse means that the factor assumes the credit, political, and foreign exchange risk for the receivables it purchases.

Accepted Answer

A) True 
 B)False

The following parties are usually guarantors in forfaiting EXCEPT:

Export receivables are normally sold at a discount. The size of the discount depends on the following factors EXCEPT:

To become a negotiable instrument, a draft must conform to the following requirements EXCEPT:

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to:

An overdraft agreement allows a firm to overdraw its bank account up to the limit of its credit line.

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

To constitute a true letter of credit transaction, the bank's commitment must be open-ended and cannot have a stated maximum amount of money.

Which of the following is NOT a financial instrument that may be included in an international trade transaction?

A revocable L/C is intended to serve as a means of arranging payment but not as a guarantee of payment.

Export credit insurance provides assurance to the exporter or the exporter's bank that, should the foreign customer default on payment, the insurance company will pay for a major portion of the loss.

Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex.

The risk of noncompletion is most important:

In a typical international trade transaction, the order of activity would be which of the following?

In the United States, domestic taxpayers bear the cost of export credit insurance and export financing provided by institutions like the FCIA and Eximbank to foreign buyers in order to create employment and maintain a technological edge.

Why might different documentation be used for an export to a nonaffiliated foreign buyer who is a new customer, as compared with an export to a nonaffiliated foreign buyer to whom the exporter has been selling for many years?

Explain what a letter of credit (L/C) is, who the principle parties are, what the principle advantage is, and how the L/C facilitates international trade.

From a financial management perspective, all of the following are primary risks associated with an international trade transaction EXCEPT:

If a foreign exchange transaction calls for payment in the exporter's currency, the importer has the foreign exchange risk.

Recourse means that the factor assumes the credit, political, and foreign exchange risk for the receivables it purchases.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

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Exam 16: International Trade Finance

The following parties are usually guarantors in forfaiting EXCEPT:

Export receivables are normally sold at a discount. The size of the discount depends on the following factors EXCEPT:

To become a negotiable instrument, a draft must conform to the following requirements EXCEPT:

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to:

An overdraft agreement allows a firm to overdraw its bank account up to the limit of its credit line.

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

To constitute a true letter of credit transaction, the bank's commitment must be open-ended and cannot have a stated maximum amount of money.

Which of the following is NOT a financial instrument that may be included in an international trade transaction?

A revocable L/C is intended to serve as a means of arranging payment but not as a guarantee of payment.

Export credit insurance provides assurance to the exporter or the exporter's bank that, should the foreign customer default on payment, the insurance company will pay for a major portion of the loss.

Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex.

The risk of noncompletion is most important:

In a typical international trade transaction, the order of activity would be which of the following?

In the United States, domestic taxpayers bear the cost of export credit insurance and export financing provided by institutions like the FCIA and Eximbank to foreign buyers in order to create employment and maintain a technological edge.

Why might different documentation be used for an export to a nonaffiliated foreign buyer who is a new customer, as compared with an export to a nonaffiliated foreign buyer to whom the exporter has been selling for many years?

Explain what a letter of credit (L/C) is, who the principle parties are, what the principle advantage is, and how the L/C facilitates international trade.

From a financial management perspective, all of the following are primary risks associated with an international trade transaction EXCEPT:

If a foreign exchange transaction calls for payment in the exporter's currency, the importer has the foreign exchange risk.

Recourse means that the factor assumes the credit, political, and foreign exchange risk for the receivables it purchases.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters