Question 1

Success of the forfaiting technique springs from the belief that the aval can be depended on.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following purposes is NOT served by the bill of lading?

Accepted Answer

A)  It acts as a receipt. 
B)  It acts as a contract. 
C)  It acts as a document of title. 
D)  It acts as all of the above. 
A)  It acts as a receipt. 
B)  It acts as a contract. 
C)  It acts as a document of title. 
D)  It acts as all of the above.

Question 3

Rogue Spices Inc. has a Canadian receivables contract for $200,000 due in 270 days. The firm has been approached by a factoring firm that offers to purchase the receivables at a 12% per annum discount plus a 1% charge for a nonrecourse clause. What is the annualized percentage all-in-cost of this factoring alternative?

Accepted Answer

A)  14.82% 
B)  13.00% 
C)  12.00% 
D)  9.09% 
A)  14.82% 
B)  13.00% 
C)  12.00% 
D)  9.09%

Question 4

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

Accepted Answer

A draft, or bill of exchange, is a writt

Question 5

Today, international trade is dominated by transactions between unaffiliated parties (known or unknown).

Accepted Answer

A) True 
 B)False

Question 6

A straight bill of lading is most likely to be used under which of the following circumstances?

Accepted Answer

A)  when the merchandise has not been paid for in advance 
B)  when the transaction is being financed by a bank 
C)  when the shipment is to an affiliate 
D)  none of the above 
A)  when the merchandise has not been paid for in advance 
B)  when the transaction is being financed by a bank 
C)  when the shipment is to an affiliate 
D)  none of the above

Question 7

The European Union recommends maximum credit terms for many items including, for example, heavy capital goods (five years), light capital goods (three years), and consumer durable goods (one year).

Accepted Answer

A) True 
 B)False

Question 8

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

Accepted Answer

Currency risk is the risk that the curre

Question 9

Because of the risks involved in international trade, most transactions follow conventional methods and rarely require flexibility or creativity on the part of management.

Accepted Answer

A) True 
 B)False

Question 10

In the case of international trade, the risk of nonpayment is essentially eliminated with the use of a letter of credit issued through a trustworthy bank.

Accepted Answer

A) True 
 B)False

Question 11

A letter of credit that is confirmed in the ________ country has the additional advantage of eliminating the problem of ________.

Accepted Answer

A)  exporter's; portfolio risk 
B)  importer's; blocked foreign exchange 
C)  exporter's; blocked foreign exchange 
D)  none of the above 
A)  exporter's; portfolio risk 
B)  importer's; blocked foreign exchange 
C)  exporter's; blocked foreign exchange 
D)  none of the above

Question 12

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

Accepted Answer

A) True 
 B)False

Question 13

A time draft is payable on presentation to the drawee; the drawee must pay at once or dishonor the draft. A sight draft, allows a delay in payment.

Accepted Answer

A) True 
 B)False

Question 14

The ________ is issued to the exporter by a common carrier transporting the merchandise.

Accepted Answer

A)  bill of lading 
B)  draft 
C)  banker's acceptance 
D)  line of credit 
A)  bill of lading 
B)  draft 
C)  banker's acceptance 
D)  line of credit

Question 15

A sight draft is payable on presentation to the drawee; a time draft allows a delay in payment.

Accepted Answer

A) True 
 B)False

Question 16

Use the information to answer the following question(s).
Cypress Systems Inc., of Florida, agrees to sell specialized hydroponic growing equipment to Landcaster's of Australia. Because the two companies have never done business with each other, Cypress requires a banker's acceptance as payment for the $1,000,000 order. The banker's acceptance carries a 1.4% commission per annum and payment is to be received in 6 months. If Cypress Inc. chooses to discount or sell the banker's acceptance to its bank, the discount rate is 1.00% per annum.
-Refer to Instruction 16.1. What is the size of the commission Cypress will pay the bank for the banker's acceptance?

Accepted Answer

A)  $7,000 
B)  $5,000 
C)  $12,000 
D)  $14,000 
A)  $7,000 
B)  $5,000 
C)  $12,000 
D)  $14,000

Question 17

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an:

Accepted Answer

A)  unaffiliated known. 
B)  affiliated party. 
C)  unaffiliated unknown. 
D)  any of the above 
A)  unaffiliated known. 
B)  affiliated party. 
C)  unaffiliated unknown. 
D)  any of the above

Question 18

An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party, could be reduced contracting costs and less to even no need to protect against nonpayment.

Accepted Answer

A) True 
 B)False

Question 19

The first owner of the bankers' acceptance created from an international trade transaction will be the importer, who receives the endorsed draft back after the bank has stamped it "accepted."

Accepted Answer

A) True 
 B)False

Question 20

A typical forfaiting transaction involves the following parties EXCEPT:

Accepted Answer

A)  importer. 
B)  exporter. 
C)  carrier. 
D)  importer's Bank. 
A)  importer. 
B)  exporter. 
C)  carrier. 
D)  importer's Bank.

Success of the forfaiting technique springs from the belief that the aval can be depended on.

Which of the following purposes is NOT served by the bill of lading?

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

Today, international trade is dominated by transactions between unaffiliated parties (known or unknown).

A straight bill of lading is most likely to be used under which of the following circumstances?

The European Union recommends maximum credit terms for many items including, for example, heavy capital goods (five years), light capital goods (three years), and consumer durable goods (one year).

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

Because of the risks involved in international trade, most transactions follow conventional methods and rarely require flexibility or creativity on the part of management.

In the case of international trade, the risk of nonpayment is essentially eliminated with the use of a letter of credit issued through a trustworthy bank.

A letter of credit that is confirmed in the country has the additional advantage of eliminating the problem of .

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

A time draft is payable on presentation to the drawee; the drawee must pay at once or dishonor the draft. A sight draft, allows a delay in payment.

The ________ is issued to the exporter by a common carrier transporting the merchandise.

A sight draft is payable on presentation to the drawee; a time draft allows a delay in payment.

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an:

An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party, could be reduced contracting costs and less to even no need to protect against nonpayment.

The first owner of the bankers' acceptance created from an international trade transaction will be the importer, who receives the endorsed draft back after the bank has stamped it "accepted."

A typical forfaiting transaction involves the following parties EXCEPT:

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

Exam 16: International Trade Finance

Success of the forfaiting technique springs from the belief that the aval can be depended on.

Which of the following purposes is NOT served by the bill of lading?

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

Today, international trade is dominated by transactions between unaffiliated parties (known or unknown).

A straight bill of lading is most likely to be used under which of the following circumstances?

The European Union recommends maximum credit terms for many items including, for example, heavy capital goods (five years), light capital goods (three years), and consumer durable goods (one year).

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

Because of the risks involved in international trade, most transactions follow conventional methods and rarely require flexibility or creativity on the part of management.

In the case of international trade, the risk of nonpayment is essentially eliminated with the use of a letter of credit issued through a trustworthy bank.

A letter of credit that is confirmed in the ________ country has the additional advantage of eliminating the problem of ________.

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

A time draft is payable on presentation to the drawee; the drawee must pay at once or dishonor the draft. A sight draft, allows a delay in payment.

The ________ is issued to the exporter by a common carrier transporting the merchandise.

A sight draft is payable on presentation to the drawee; a time draft allows a delay in payment.

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an:

An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party, could be reduced contracting costs and less to even no need to protect against nonpayment.

The first owner of the bankers' acceptance created from an international trade transaction will be the importer, who receives the endorsed draft back after the bank has stamped it "accepted."

A typical forfaiting transaction involves the following parties EXCEPT:

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

A letter of credit that is confirmed in the country has the additional advantage of eliminating the problem of .